Q2 2024 Kingsoft Cloud Holdings Ltd Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Kingsoft Cloud's second quarter 2024 earnings conference call.
Operator: to 2024 earnings conference call.
Walter, 2024 earnings conference call. At this time all participants are in a listen only mode, after the speakers presentation there will be a question and answer session. To ask a question during the session you'll need to press star one and one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question please press star one and one again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Shan, IR Director of Kingsoft Cloud. Please go ahead. Thank you, Mr. Chairman and the CEO of Mr. Zhou Tao and the staff of Mr. Henry Floor. Mr. Zhou will reveal our business strategy, operations and company highlights. Followed by Mr. Floor, we will discuss the financials and the guidance. There will be a little about to answer your questions during the Q&A session that follows. There will be consecutive interpretations. All interpretations are for your colleagues and the reference for the only. In case of any discrepancy, management statement in the original language, you won't be well. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of section 21e of the Security Exchange Act of 1934, as amended and as defined in the U.S. trial and security litigation reform act of 1995. These forward-looking statements are based about management's current expectations and for marketing and operating conditions and relate to you and standing well known or known risk uncertainties and other factors of which are difficult to predict and the manual for which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Other information regarding these and other risk uncertainties of factors included in the company's fighting with the U.S. as easy. The company does now undertake any obligation to update any forward-looking statements. As a result of new information, future events or otherwise, is that as required under aptly below? Finally, please know that unless otherwise stated, all financial figures mentioned during this conference call are denominated in R&B. It's now my pleasure to introduce our last term and the CEO Mr. Dilk. Please go ahead. Thank you. [inaudible]
Unknown Executive: 2024 earnings conference call.
Operator: At this time, all participants are in a listen-only mode.
Operator: At this time all participants are in a listen-only mode.
Operator: After the speaker's presentation, there will be a question and answer session.
Operator: After the speaker's presentation there will be a question and answer session.
Operator: Thank you for participating and you may
Speaker Change: At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again.
Operator: To ask a question during the session, you will need to press star 1 and 1 on your telephone. You'll then hear an automated message advising your hand is raised.
Operator: To ask a question during the session you will need to press star 1 and 1 on your telephone. You'll then hear an automated message advising your hand is raised.
Operator: To withdraw your question, please press star 1 and 1 again.
Operator: To withdraw your question, please press star 1 and 1 again.
Operator: Please be advised today's conference is being recorded.
Operator: Please be advised today's conference is being recorded.
Operator: I would now like to hand the conference over to your first speaker today,
Operator: I would now like to hand the conference over to your first speaker today, Nicole Shan, IR Director of Kingsoft Cloud.
Speaker Change: Please be advised today's conference is being recorded.
Operator: Nicole Shan, IR Director of Kingsoft Cloud.
Nicoshan Ir: I would now like to hand the conference over to your first speaker today, Nicole Shan, IR Director of Kingsoft Cloud. Please go ahead.
Nicole Shan: Please go ahead.
Nicole Shan: Please go ahead.
Nicole Shan: Thank you operator.
Nico Shan: Thank you, operator. Hello, everyone, and thank you for joining us today. Kingsoft Cloud's second quarter 2024 news release was distributed earlier today and is available on our IR website at ir.tsyun.com, as well as on global news services.
Nicole Shan: Hello everyone and thank you for joining us today.
mr hhorrandfor: On the call today from Kingsoft Cloud, we have our Vice-Chairman and the CEO , Mr. Zhou Tao, and the staff of Mr. Henry Huang.
Speaker Change: Mr. Zhao will review our business strategy, operations, and company highlights.
mr ho: Followed by Mr. Ho, who will discuss the financials and the guidance.
Speaker Change: They will be available to answer your questions during the Q&A session that follows.
Speaker Change: There will be consecutive interpretations. All interpretations are for your convenience and reference purpose only. In case of any discrepancy, management statement in the original language will prevail.
Speaker Change: Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended and as defined in the U.S. Tribal Security Litigation Reform Act of 1995.
Speaker Change: These forward-looking statements are based upon management's current expectations and current marketing and operating conditions.
Speaker Change: and relate to events that involve known or unknown risks, uncertainties, and other factors of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ maturely from those in the forward-looking statements.
Speaker Change: Other information regarding this and other risks and certainties of factors are included in the company's filings with the USSEC.
Speaker Change: The committee does not undertake any obligation to update any forward-looking statements.
Speaker Change: As a result of new information, future events, or otherwise, is not as required under applicable law.
Goul: Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in ERMB. It is now my pleasure to introduce our Vice Chairman and the CEO , Mr. Zhao. Please go ahead. Thank you.
Nicole Shan: Kingsoft Cloud's, second quarter 2024 earnings release was distributed earlier today and is available on our IR website at ir.ksyun.com as well as on global news services.
Speaker Change: Hello everyone, welcome to the Kingsoft Cloud 2024 Q2 earnings call.
Nicole Shan: Thank you, Operator.
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Speaker Change: Firmly advance the strategy of high-quality and sustainable development.
Speaker Change: The company's appearance has been completely transformed.
Speaker Change: First of all, a fundamental improvement in profitability.
Speaker Change: The gross profit margin has steadily increased from a low single digit to over 17%.
Speaker Change: Turn positive at a rate of 3% with b
Speaker Change: Steadily moving towards turning operating profit and net profit positive
Speaker Change: 2. Rapidly embracing AI machine opportunities. The proportion of new AI business in public cloud has quickly increased from 0% to 26%, leading the industry. 3. Firmly clearing out low-profit businesses. The current business proportion is 40%, which has decreased to about 20%. The risk of concentration on a single large customer has been fundamentally resolved. 4. Refined management of procurement, assets, and operations. Quarterly cost expenses have decreased by nearly 300 million RMB, accounting for 15% of revenue. 5. Looking ahead, the Wuhan R&D center has rapidly risen, now accounting for about 30% of the company's total employees, laying a solid foundation for the company's long-term technical benefits. Completed dual primary listing in Hong Kong, entered the Hang Seng Composite Index and Stock Connect, solidifying the infrastructure of the capital market. All these have laid the foundation for the company's further high-quality and sustainable development. I hereby express my sincere gratitude to all our long-term concerned and supportive customers, shareholders, and employees. From 0% to 26% is an industry-leading figure. Third, we firmly face low-end enterprises. Due to the profit from CDN services decreasing from 40% to 20%, and the risk of concentration on a single large customer has been fundamentally resolved. Fourth, we conduct precise management in purchasing products and industries. Due to weekly expenses and costs decreasing to about 30 billion RMB, representing 15% of weekly revenue. Fifth, from a long-term perspective, the Wuhan technology center has rapidly upgraded, including 30% of the entire workshop, establishing a fixed foundation in the continuous technology field. Additionally, we have completed two major upgrades in Hong Kong currency trading and joined the coverage of Hong Kong currency and Hong Kong currency connect, ensuring the foundation of our capital market.
Speaker Change: She's hooked.
Speaker Change: Quickly embrace the opportunities of AITC
Speaker Change: The proportion of public employees involved in the new round of AI business.
Speaker Change: Rapidly increased from zero to 26%, leading the industry
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Speaker Change: Firmly phase out low-profit businesses
Speaker Change: Today, the business proportion has decreased from 40% to about 20%, fundamentally resolving the concentration risk of a single major client.
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Speaker Change: Refined management of procurement, assets, and operations
Speaker Change: Quarterly costs and expenses decreased by nearly 300 million yuan
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Speaker Change: Lay a solid foundation for the company's long-term technical interests.
Speaker Change: Completed dual primary listing in Hong Kong, entered Hang Seng Index, China Index, and Stock Connect.
Speaker Change: Strengthen the infrastructure of the capital market
Speaker Change: All of these have laid a foundation for the company's further high-quality and sustainable development.
Speaker Change: I would like to express my sincere gratitude to all our customers, shareholders, and employees who have long cared for and supported us.
Nicole Shan: On the call today from
Nicole Shan: Hello, everyone, and thank you for joining us today.
Speaker Change: Hello everyone. Thank you and welcome all for joining Kingsoft Cloud's second quarter 2024 earnings call. I am Zhou Tao, CEO of Kingsoft Cloud.
Nicole Shan: Kingsoft Cloud we have our Vice Chairman and the CEO Mr. Zhou Tao and the CFO Mr. Henry Huang.
Nicole Shan: Kingsoft Cloud's second quarter 2024 news release was distributed earlier today and is available on our IR website at ir.ksyu.com, as well as on global news services.
Speaker Change: Looking back on the two years since August 2022, our entire Kingsoft Cloud team has firmly executed the high-quality and sustainable development strategy.
Nicole Shan: On the call today from Kingsoft Cloud, we have our Vice Chairman and the CEO, Mr. Zhou Tao, and the CFO, Mr. Henry He.
Nicole Shan: Mr. Zhou will review our business strategy, operations, and the company highlights, followed by Mr.
Speaker Change: And the company has undergone a complete transformation.
Speaker Change: First of all, profitability fundamentally improved, as gross margins steadily increased from low single digits to 17%.
Speaker Change: Adjusted EBITDA margin increased to 3% after turning positive in Q1 and we are well on track to turn operating and net profit positive.
Speaker Change: second wely embracing aigc opportunities
Speaker Change: As this new round of AI services revenue contribution to public cloud increased from 0 to 26 percent, a leading figure in the industry.
Speaker Change: Third, firmly phasing out low-margin businesses.
Speaker Change: as cds services revenue contribution decreased from approximately forty percent to a twenty percent
Speaker Change: And along with that, single large customer concentration risk fundamentally resolved.
Speaker Change: Fourth, implementing refined management in aspects of procurement, assets, and operation, as quarterly costs and expenses decreased by approximately RMB 300 million, representing 15% of quarterly revenues.
Speaker Change: this
Speaker Change: taking long-term perspectives.
willhan: Wuhan R&D Center quickly scaled up to hosting approximately 30% of the entire workforce, including Camelot.
Speaker Change: laying a solid foundation for sustained technological leadership, as well as completing dual primary listing on Hong Kong Stock Exchange, followed by inclusion into the Hang Seng Composite Index and Hong Kong Stock Connect, solidifying our capital markets infrastructure.
Nicole Shan: Mr. Zhou will review our business strategy, operations and the company highlights, followed by Mr. Huang who will discuss the financials and the guidance. They will be available to answer your questions during the Q&A session that follows. There will be consecutive interpretations.
Speaker Change: Next, I will specifically introduce the performance of the second quarter of 2024. The adjusted gross profit reached RMB 320 million, a year-on-year increase of 56.4%, and the adjusted gross profit margin reached 17.1%, achieving continuous and steady improvement for eight consecutive quarters, setting a new historical high. The adjusted EBITDA reached RMB 60.59 million, and the adjusted EBITDA margin reached 3.2%. On the basis of turning positive in the first quarter, it continued to improve steadily, with a significant year-on-year increase of 6.5 percentage points. The net cash inflow from operating activities was RMB 150 million, further proving the company's ability to generate cash from operations. The improvement in various financial performance indicators marks the implementation of Kingsoft Cloud's high-quality sustainable development strategy, indicating that the company has entered a new stage of development, laying a solid foundation for the long-term healthy development in 2024 and beyond. The revenue growth from high-priced added products and services, along with the pressure brought by the strict adjustment of our CDN services, has contributed to this growth.
Speaker Change: All of these have laid solid foundation to the high quality and sustainable development in the future. I would like to express our sincere gratitude to all our customers, shareholders, and employees who have consistently supported and cared for us over the long term.
Nicole Shan: He, who will discuss the financials and the guidance. They will be available to answer your questions during the Q&A session that follows.
Speaker Change: Next, I will specifically introduce the performance for the second quarter of 2024. In this quarter, Kingsoft Cloud has shown improvements in revenue scale and profitability.
Speaker Change: New breakthroughs have been achieved in operating cash flow.
Speaker Change: Revenue reached 1.89 billion RMB.
Speaker Change: Not only did it achieve a month-on-month growth of 6.5%, but it also achieved a year-on-year growth of 3.1%.
Speaker Change: The revenue growth from our high value-added products and services offset the pressure caused by the proactive adjustments in the CDN business.
Nicole Shan: Our interpretations are for your convenience, and reference purpose only. In case of any discrepancy management statement in the original language will prevail.
Speaker Change: After adjustment, the gross profit reached RMB 320 million.
Speaker Change: Year-on-year growth of 56.4%
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Speaker Change: After adjustment, the adjusted EBITDA and Darin Coin amount to 60.59 million yuan.
Speaker Change: 3.2%
Speaker Change: On the basis of a significant positive shift of 160 million, it continues to improve steadily, with a year-on-year increase of 6.5 percentage points.
Speaker Change: Net cash inflow from operations of 150 million yuan
Speaker Change: The ability to generate results from business operations continues to be proven.
Speaker Change: The improvement of numerous financial performance indicators marks the implementation of Kingsoft Cloud's high-quality sustainable development strategy, and the company's development has entered a new stage.
Speaker Change: Laid a solid foundation for the long-term healthy development in 2024 and beyond.
Speaker Change: Now I will walk you through the business highlights of the second quarter, 2024. This quarter, Kingsoft Cloud has achieved new breakthroughs in terms of revenue scale, profitability, and operating cash flow.
Nicole Shan: There will be consecutive interpretations.
Nicole Shan: Our interpretations are for your convenience and reference purpose only.
Speaker Change: In particular, our revenues reached RMB 1.89 billion, not only a sequential growth of 6.5%, but also a year-over-year expansion of 3.1%.
Speaker Change: Revenue from high value-added products and services has grown, offsetting pressure brought about by our proactive adjustment of the CDN services.
Speaker Change: Adjusted gross profits reached RMB 323 million, increased by 56.4% year-over-year.
Speaker Change: Adjusted gross margin increased to 17.1%, marking the 8th quarter of consecutive improvement.
Speaker Change: Adjusted EBITDA reached RMB 60.59 million, and adjusted EBITDA margin reached 3.2%, a sequential improvement after the milestone of turning positive in Q1, and a significant increase of 6.5 percentage points year over year.
Speaker Change: Net operating cash inflow amounted to RMB 115 million, once again demonstrating our cash-generating ability from operating activities.
Speaker Change: The improvement of various financial performance indicators signifies that Kingsoft Cloud's high-quality and sustainable development strategy has been effective, marking a new phase in our development and laying a solid foundation for long-term healthy growth in 2024 and beyond.
Speaker Change: In the public cloud sector, we achieved revenue of 1.23 billion RMB this quarter, a year-on-year increase of 6.5% and a quarter-on-quarter increase of 4%. We have made significant progress in the areas of Xiaomi, Kingsoft ecosystem, AI business, and supply chain. Firstly, as the sole strategic cloud platform for the Xiaomi Kingsoft ecosystem, we have closely seized business opportunities for cloud usage within the ecosystem. This quarter, revenue contributions from Xiaomi and Kingsoft accounted for 20%, reaching 370 million RMB, a year-on-year increase of 36.9%. Secondly, the AI business continues to gain momentum, with AI revenue this quarter significantly increasing to 330 million RMB, twice the QE AI revenue, accounting for 26.3% of public cloud revenue, leading the industry. Additionally, the diversification of our customer industry distribution has further improved, including large model companies, autonomous driving, internet applications, and more. We have established a substantial computing power resource pool, with industry-leading large-scale supercomputing network capabilities, capable of meeting the networking requirements of ten-thousand-card-level supercomputing clusters. Thirdly, we have built a comprehensive supply chain system to ensure the scale of our computing resources, control procurement costs, and fully utilize data center resources in the central and western regions, significantly reducing costs compared to data centers in core eastern cities. We will continue to strictly control procurement costs internally, expand supplier coverage, and seek the optimal combination of price and service in the market. Furthermore, the AI business continues to grow. This year, AI revenue reached 32.6 billion RMB, doubling the figures from the first half, and accounted for 26.3% of public internet revenue. Our AI customer base has also become more diverse, including large language model companies, software, internet applications, and others. We have established a comprehensive data resource framework, leading the business in large-scale network capabilities, capable of supporting super data framework network design at the 10,000 transfer level. Lastly, we have established a complete supply chain system to maintain a stable intelligent data resource framework and manage human customers.
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Speaker Change: Month-on-month growth of 4%
Speaker Change: We are in the Xiaomi Kingsoft ecosystem
Speaker Change: There has been progress in all three directions of the business supply chain.
Speaker Change: First of all, as the only strategic cloud platform in the Xiaomi Kingsoft ecosystem, we closely seize the business opportunities of cloud usage within the ecosystem. This quarter, the revenue contribution from Xiaomi and Kingsoft accounted for 20%, reaching 370 million yuan, a year-on-year increase of 36.9%.
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Speaker Change: The AI business continues to gain momentum, with AI revenue significantly increasing to 330 million RMB this quarter.
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Speaker Change: Achieve twice the QE AI revenue, accounting for 26.3% of public cloud revenue
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Speaker Change: The diversification of customer industry distribution has further improved, including large model companies, autonomous driving, internet applications, etc.
Speaker Change: We have established a sizable pool of computing resources.
Speaker Change: The large-scale supercomputing network setup capability is industry-leading, able to meet the networking requirements of supercomputing clusters at the ten-thousand-card level.
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Speaker Change: Build a comprehensive supply chain system to ensure the scale of asset resources.
Speaker Change: Control procurement costs, make full use.
Speaker Change: The cost of data center resources in the Midwest has significantly decreased compared to the core cities in the East. We will continue to strictly control procurement costs internally, expand the range of suppliers, and seek the best combination of price and service in the market.
Nicole Shan: In case of any discrepancy, management statement in the original language will prevail.
Nicole Shan: Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Security Exchange Act of 1934, as amended and as defined in the U.S.
Nicole Shan: Private Security Litigation Reform Act of 1995.
Nicole Shan: These forward-looking statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risk uncertainties and other factors, of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance, or achievements to differ maturely from those in the forward-looking statements.
Nicole Shan: Further information regarding these and other risk uncertainties or factors are included in the company's filings with the USSEC.
Speaker Change: In terms of public cloud services, revenues reached RMB 1.23 billion this quarter, representing a year-over-year increase of 6.5 percent and a quarter-over-quarter increase of 4 percent.
Nicole Shan: The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under applicable law.
Nicole Shan: Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in the RMB.
Speaker Change: We have seen positive outcomes across our three priorities for public cloud services, namely the Xiaomi and Kingsoft ecosystem, AI businesses, and supply chain.
Nicole Shan: It is now my pleasure to introduce our Vice Chairman and CEO, Mr. Zhao.
Tao Zou: Please go ahead.
Speaker Change: First of all, serving as the sole strategic cloud platform within the Xiaomi and Kingsoft ecosystem.
Tao Zou: Thank you.
Tao Zou: 大家好,歡迎參加金山雲2024年第二季度業績電話會。 我是Kingsoft Cloud的CEO 周涛 回顧2022年8月至今, 全體金山雲同仁團結一心,用兩年的時間 堅定推進高質量可持續發展戰略, 公司面貌煥然一新 首先,盈利能力根本改善, 毛利率從第一個為數 持续稳步提升至17%以上, 彼得律 转正至3% 向金银利润和净利润转正稳步迈进 快速擁抱AITC的機遇, 新一輪AI業務,公有雲筆動 从零迅速提升至26%,行业领先。 堅定傾退低利潤業務 今天业务占比由40%下降至约20%,单一大客户集中风险得到根本解决。 精細化管理採購 备胎和运营, 季度成本費用下降近3億元 再来收比15% 左眼長遠 武汉研发中心迅速崛起, 公司本部員工總數約30% 为公司长期技术利益, 打下坚实的基础 完成香港雙重主要上市,進入恆生、中指和港股通。 助老資本市場的基礎設施 这些都为公司的进一步高质量可持续发展奠定了基础, 我在此向所有長期關心、支持我們的客戶、股東和員工朋友們表示誠摯的感謝。 Hello, everyone.
Speaker Change: We firmly grasp the cloud business opportunities within the ecosystem. This quarter, revenue contribution from Xiaomi and Kingsoft reached 20%, amounting to RMB 370 million, and witnessed a year-over-year increase of 36.9%.
Tao Zou: Thank you and welcome all for joining Kingsoft Cloud's second quarter 2024 earnings call.
Tao Zou: I am Zou Tao, CEO of Kingsoft Cloud.
Speaker Change: Secondly, AI businesses continue to bear fruits.
Speaker Change: This quarter, AI revenue surged to RMB 326 million, doubling the amount in the first quarter and accounting for 26.3% of public cloud revenues, an industry-leading position.
Tao Zou: Looking back on the two years since August 2022, our entire Kingsoft Cloud team has firmly executed the high-quality and sustainable development strategy. And the company has undergone a complete transformation, First of all, profitability fundamentally improved, as gross margins steadily increased from low single digits to 17%, adjusted EBITDA margin increased to 3% after turning positive in Q1.
Tao Zou: And we are well on track to turn operating and net profit positive.
Tao Zou: Second, swiftly embracing AIGC opportunities.
Tao Zou: This new round of AI services revenue contribution to public cloud increased from 0 to 26%, a leading figure in the industry.
Speaker Change: Our AI customer base also further diversified, including large language model companies, self-driving, internet applications, and others.
Speaker Change: We have established a substantial computing resource pool, leading the industry in large-scale network capabilities, capable of supporting the networking topology of supercomputing cloud clusters at the 10,000-chip level.
Tao Zou: Third, firmly facing out low-margin business, as CDN services revenue contribution decreased from approximately 40% to 20%. And along with that, single large customer concentration risk fundamentally resolved.
Speaker Change: Thirdly, we built a comprehensive supply chain system, securing the scale of a stable intelligent computing resource pool and managing procurement costs.
Tao Zou: Fourth, Implementing refined management in aspects of procurement, assets, and operations, decreases by approximately RMB 300 million, taking long-term perspectives as Wuhan R&D Center quickly scaled up to hosting approximately 30% of the entire workforce, including Camelot, laying a solid foundation for sustained technological leadership, as well as completing dual primary listing on Hong Kong Stock Exchange, followed by inclusion into the Hang Seng Composite Index and Hong Kong Stock Connect, solidifying our capital markets infrastructure.
Speaker Change: By fully utilizing data centers' resources in central and western regions of China, costs are significantly reduced compared to the data centers in the core cities in the east. Meanwhile, we strictly control internal procurement costs, expand coverage of suppliers, and seek the best combination of price and quality. In the industry cloud sector, we achieved revenue of 660 million yuan this quarter. In the public service sector, we actively seize opportunities in government cloud and state-owned enterprise cloud projects. For both government and enterprise application scenarios, we promote standardized operations based on model capabilities, big data, and collaborative office work. In the China Government Cloud Market Research Report released by CCID Consultants in June 2020, the company was listed as an industry leader. In the IDC China Government Cloud Service Operation Market Report, we ranked among the top six in the industry, reflecting the market's recognition of our product capabilities and market share. This quarter, we advanced a benchmark project for the implementation of large models in the public service sector, which will assist the Beijing Municipal Commission of Housing and Urban-Rural Development in building projects such as the 12345 intelligent decision-making and smart inquiry system. This will improve the accuracy and efficiency of summarizing and categorizing 12345 hotline data, enhancing service quality and response speed. In the digital health sector, the Changzhou Health Cloud welcomed its fifth expansion project, which will meet the needs of new business launches and extended image storage, fully validating the long-term cooperation, construction, and operational development potential of industry cloud customers and projects. We utilized our four elements, such as models, big data, and studio collaboration, to provide targeted use cases for the public service and enterprise sectors. In the China E-Government Internet Market Research Report, released by CCID in June 2024, we are among the leading companies in China. In the IDC China E-Government Internet Service Market Report, we are among the top six companies in the internet market sector. These rankings demonstrate the market's recognition of our internet product capabilities and market share. Additionally, we enhance the accuracy and efficiency of the public service sector, summarize data, analyze the 12345 hotline for intelligent decision-making, and improve service quality and response speed.
Tao Zou: All of these have laid solid foundation to the high quality and sustainable development in the future.
Speaker Change: By fully utilizing data centers' resources in central and western regions of China, costs are significantly reduced compared to the data centers in the core cities in the East.
Speaker Change: Meanwhile, we strictly control internal procurement costs, expand coverage of suppliers, and seek the best combination of price and quality.
Speaker Change: In terms of industry operations, revenue for this quarter reached 660 million yuan.
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Speaker Change: For government and enterprise application scenarios, promote standardized operations based on model capabilities, big data, and collaborative office work.
Speaker Change: In the market research report on Chinese government officials released by Cedric Consultants in June 2020, the company was listed
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Speaker Change: Ranked among the top six in the industry in the operations service market report, reflecting the industry's recognition of the company's product capabilities and market share.
Tao Zou: I would like to express our sincere gratitude to all our customers, shareholders, and employees who have consistently supported and cared for us over the long term.
Speaker Change: This quarter, we have advanced a benchmark project for the implementation of large models in the public service sector, which will assist Beijing.
Speaker Change: Assist the Construction Committee in creating projects such as 12345 Intelligent Decision-Making and Smart Inquiry.
Speaker Change: Enhance the accuracy and efficiency of the Housing and Urban-Rural Development Committee in summarizing, classifying, and compiling data from the 12345 hotline, and improve service quality and response speed.
Speaker Change: In the field of digital health, Changzhou Health Cloud is welcoming its fifth expansion project, which will meet the needs of new business launches for customers.
Speaker Change: The demand for extended image storage fully validates the long-term cooperation with industry cloud customers and projects, as well as the development potential of construction and operation.
Speaker Change: In the field of AI industry applications, our subsidiary Kingsoft Intelligence, which we have invested in and built, is gradually starting to advance its business. It focuses on seizing business opportunities in enterprise AI software applications and delivery deployment.
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Speaker Change: The digital transformation of legal services has taken a significant leap forward.
Tao Zou: 下面我向大家具体介绍2024年第二季度的业绩情况。 金山雲在收入規模、盈利能力 经营现金流方面都取得了新的突破, 收入達人民幣18.9億元 不仅环比增长6.5% 还实现了同比增长3.1% 我们的高附加值产品和服务的收入规模增长抵消了CDN业务主动调整带来的压力 调整后毛利额达人民币3.2亿元, 同比增長56.4% 调整后毛利率达17.1%,实现了连续8个季度持续稳步提升,再创历史新高。 调整后EBITDA和达人民币6059万元,调整后的EBITDA率达 咱们就三点啊, 在一季度以弊大转正基础上继续稳步向好,且同比大幅提升6.5个百分点。 金银现金净流入1.5亿元, 经营活动造血能力继续得到证明 诸多财务业绩指标的提示提升标志者今天与高质量可持续发展战略得到的落实 公司发展迈入新阶段, 為2024年及以後的長期健康發展奠定了堅實基礎, Now I will walk you through the business highlights of the second quarter of 2024. This quarter, Kingsoft Cloud has achieved new breakthroughs in terms of revenue scale, profitability, and operating cash flow. In particular, our revenues reached RMB 1.89 billion, not only a sequential growth of 6.5%, but also a year-over-year expansion of 3.1%. Revenue from high-value-added products and services has grown, offsetting pressure brought about by our proactive adjustment of the CDN services. Adjusted gross profit reached RMB323 million, increased by 56.4% year-over-year, adjusted gross margin increased to 17.1% marking the 8th quarter of consecutive improvement.
Speaker Change: Moving on to Enterprise Cloud Services, where revenues amounted to RMB657 million.
Speaker Change: In public services space, we have actively pursued opportunities within public service cloud and state-owned enterprise cloud.
Tao Zou: Just did EBITDA reached RMB 60.59 million and adjusted EBITDA margin reached 3.2%, a sequential improvement after the milestone of turning positive in Q1 and a significant increase of 6.5 percentage points year over year.
Speaker Change: Implementing standardized operation and maintenance, we have leveraged our four components such as models, big data, and workspace collaboration, targeting use cases in a public service and enterprise domains.
Speaker Change: In the China e-government cloud market research report released in June 2024 by CCID, a leading consulting company in China, we are ranked in the leaders quadrant.
Speaker Change: In the China e-government cloud operation service market report by IDC, we ranked as the top six companies in the industry.
Speaker Change: Such ranks reflect recognition from the industry market for our product capabilities and market share.
Speaker Change: This quarter, we have promoted the benchmark project of implementing large language models in public services sector.
Speaker Change: which will assist the Beijing Municipal Commission of Housing and Urban Rural Development in building the 12345 Hotline Intelligent Decision Making.
Speaker Change: and smart urry and data projects enhancing the accuracy and efficiency of the commission in summarizing statistics and categorizing the one t torythree for five ar line data and improving the service quality and response fees
CFO Perry: In the healthcare space, Changzhou Health Cloud has launched its Phase 5 expansion. It will meet the requirements of new business scenarios and the needs of extended archives of healthcare images, fully validating the potential to establish long-term cooperation for construction and operation of industry cloud customers and projects. In AI industry applications, Kingsoft AI, a subsidiary invested and established by us, has gradually started to promote its business, focusing on seizing business opportunities in enterprise AI software applications and delivery deployments. In terms of industry models, we officially launched a strategic cooperation with Denton's law firm, a leading law firm in China, and established the Joint Laboratory of Legal Artificial Intelligence, thereby continuously creating value for our customers, shareholders, employees, and other stakeholders. Next, let's invite CFO Perry to introduce the financial performance. Thank you. Thank you, Mr. Zhou.
Speaker Change: in healthcare space.
Speaker Change: Changzhou Health Cloud has launched its Phase 5 expansion.
Speaker Change: It will meet the requirements of new business scenarios and the needs of extended archives of healthcare images, fully validating the potential to establish long-term cooperation for construction and operation of industry cloud customers and projects.
Speaker Change: In AI industry applications, Kingsoft AI, a subsidiary invested and established by us, has gradually started to promote its business.
Speaker Change: Focusing on Seeding Business Opportunities in Enterprise AI Software Applications and Delivery Deployment.
Speaker Change: in terms of industryamoutt we officially launched a strategic corooration with denton slaw firm in leading law firm in china and established the joint laboratory of legal artificial intelligence taking a leak forward in digital transformation of low industry
Speaker Change: In terms of product technology, we continue to adhere to technological benefits, focusing on creating a first-class customer experience for our core products.
Speaker Change: In terms of AI, based on the increasing data cleaning needs of AI customers, we have integrated products such as bare metal and object storage.
Speaker Change: Formulate a comprehensive solution for data cleaning targeting text, images, videos, and other types of data, to meet the data cleaning needs and requirements for pre-training datasets, fine-tuning data integration, and data set generation.
Speaker Change: In the industry cloud sector, Galaxy Cloud has launched a low-cost, high-density proprietary cloud platform.
Speaker Change: Standard configuration, high-density unit cost reduction up to 64%.
Speaker Change: Strength density increased by up to 300%
Speaker Change: In terms of product and technology, we uphold the principles of building success based on technology and innovation, focusing on delivering fast and plus customer experience across our four product offerings.
Speaker Change: In AI space, in response to surging data cleansing demands from AI clients,
Speaker Change: We have integrated products like bare metal and object storage to create a holistic solution for data cleansing accommodating text, images, and videos. This multimodal solution is tailored to meet the data cleansing requirements for the creation of both pre-training and fine-tuning datasets.
Speaker Change: in enterprise cloud base the gallergy stx level releas a proprietary result level with low costs and high density
Speaker Change: Compared to original standard configuration, the high-density version has achieved a maximum reduction of 64% in cost per instance and an increase of up to 300% in instance density.
Speaker Change: From here again
Speaker Change: kingim will quar tr anian rather than s as su by value the gending systemis
Speaker Change: The fundamentals of Qingshan Yun have been completely renewed.
Speaker Change: ja welife ochang ti shittson yanmee chsan inau andendani
Speaker Change: Deep integration and cooperation with Xiaomi's ecosystem
Speaker Change: chengge ar h hasn't seen chareman the etail for council in it long we want the d cop or don't your angle such how do youevent so e un our joaza
Speaker Change: Next, let's welcome CFO Harry to present the financial performance for the second quarter. Thank you.
Speaker Change: In summary, after two years of step-by-step implementation of the high-quality and sustainable development strategy,
Nicole Shan: Before we begin I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Security Exchange, Act of 1934 as amended and as defined in the U.S.
Speaker Change: kings of cloud fundamentals have undergone a complete transformation
Nicole Shan: Private Security Litigation Reform Act of 1995.
Speaker Change: Looking forward, we will continue to enhance our profitability and cash-generating capabilities.
Nicole Shan: These forward-looking statements are based upon management's current expectations and current, market and operating conditions and relate to U.N. setting well-known or unknown risk uncertainties and other factors of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ maturely from those in the forward-looking statements. Further information regarding these and other risk uncertainties or factors are included in, the company's filings with the U.S. SEC.
Speaker Change: Deepened cooperation with Xiaomi and Kingsoft's ecosystem strengthened Wuhan Research Center and developed comprehensive understanding of new AI and explored such opportunities, thereby continuously creating value for our customers, shareholders, employees, and other stakeholders.
Nicole Shan: The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise except as required under applicable law.
Henry: I will now pass the call over to our CFO Henry to go over our financials for the second quarter of 2024. Thank you. Thank you, Chairman Zhou.
Nicole Shan: Finally, please note that unless otherwise stated, all financial figures mentioned during this conference call are denominated in ERMB.
Perry: Thank you, Mr. Cao, and welcome everyone to the meeting. Now I will present our financial achievements to everyone. In the second half of 2024, we want to emphasize three important areas of progress. First, we are very satisfied with the further progress of our financial model. By applying the first principle of thinking, we decided to enter a way focused on making money. In the past half, our adjusted profit growth reached 60.6 billion RMB and achieved 3.2%, which proves our successful implementation of the high-quality Hengsheng development strategy. Second, in this half, our profit reached 189.18 billion RMB, with Hengsheng growth reaching 3.1%. In the past half, our profit growth reached 6.5%. By focusing on adjusted profit growth to achieve a high-quality Hengsheng development strategy, we provided more resources to develop high-quality services. In this half, our AI profit growth reached 32.6 billion RMB, achieving 26% of public internet service profit, doubling from the previous half. We have established a durable supply chain, high-quality computing capabilities, and long-term cooperation to provide our customers with our growing AI profit. In response to price pressure and low profit margins, we strategically reduced the proportion of CDN services from 19% of total profit to 23% in the previous half. Third, we recorded the inclusion of economic circulation flow, with an inclusion flow of 15.12 billion RMB. We also provided many financial channels to support our AI business, including but not limited to metal groups, financial leasing, and other bank capital. These are the details of our financial results. This week's total profit is 189.18 billion RMB, with an annual growth of 3.1%. The profit from public internet services is 123.45 billion RMB, up 4% from last week's 118.74 billion RMB, mainly driven by AI business profit growth, which increased to 32.6 billion RMB.
Nicole Shan: It is now my pleasure to introduce our Vice Chairman and CEO, Mr. Zhou.
Tao Zou: Please go ahead.
Henry: Thank you, Ms. Zou, and I welcome everyone for joining the call.
Henry: Now I will walk you through our financial results for the second quarter of 2024.
Tao Zou: Thank you.
Tao Zou: 大家好,欢迎参加金山云2024年第二季度业绩电话会。 我是金山云CEO,周涛。回顾2022年8月至今,全体金山云同仁 团结一心,用两年的时间坚定推进高质量可持续发展战略, 公司面貌焕然一新。 首先,盈利能力根本改善,毛利率从低个位数持续稳步提升至17% 以上,以B带率转正至3%,向经营利润和净利润转正稳步迈进。
Speaker Change: We would like to highlight three key areas of progress.
Speaker Change: First, we are very pleased with ongoing improvements in our financial matrix.
Speaker Change: by applying the first principple thinking we are committed to a profit focused approach that has lled to consecutive increases in our course profit orross margin ebitda profit and ebitda margin over the past several quarters
Speaker Change: This quarter, our adjusted growth margin reached 17.1 percent, marking eight consecutive quarters of steady growth.
Speaker Change: While adjusted gross profit hit 333.4 million RMB.
Speaker Change: After turning a profit in adjusted EBITDA margin last quarter, we continued with this positive trend with 60.6 million RMB in EBITDA and 3.2% in EBITDA margin.
Speaker Change: Demonstrating our successful execution of a high-quality sustainable development strategy.
Tao Zou: 其次, 1.快速拥抱AI机器的机遇, 新一轮AI业务占公有云比重,从0迅速提升至26%,行业领先 2.坚定清退低利润业务,今天业务占比由40%下降至约20%,单一大客户集中风险得到根本解决, 3.精细化管理采购资产和运营,季度成本费用下降近3亿元,占收比15%
Tao Zou: 5.着眼长远,武汉研发中心迅速崛起,已占公司本部员工总数约30%,为公司长期技术利益打下坚实基础
Speaker Change: Second, this quarter our revenue reached
Speaker Change: 1,891.8 million RMB, reverting to a positive increasing trend with a 3.1% increase year-over-year increase and a 6.5% rise quarter-over-quarter.
Speaker Change: By strategically adjusting our revenue mix in line with our high-quality and sustainable development strategy, we have allocated more resources to develop high-value services.
Speaker Change: This quarter, our AI revenues grew to 326 million RMB.
Speaker Change: making up 26%.
Speaker Change: of our total public cloud services revenue doubled the amount from last quarter.
Speaker Change: We have established resilient supply chain, scalable computing power and a long-term partnership with customers to support our growing AI revenues.
Speaker Change: In response to costs, pressure, and a low margin, we have strategically reduced the proportion of our CDN services to 19% of total revenue.
Tao Zou: Net operating cash inflow amounted to RMB $150 million, once again demonstrating our cash generating ability from operating activities.
Speaker Change: down from 23% last quarter.
Tao Zou: The improvement of various financial performance indicators signifies that Kingsoft Cloud's high-quality and sustainable development strategy has been effective, marking a new phase in our development and laying a solid foundation for long-term healthy growth in 2024 and beyond.
Speaker Change: Third, we have recorded a net inflow of operating cash flow amounting to 151.2 million RMB.
Speaker Change: We also secure various financial channels to support our AI business.
Speaker Change: including but not limited to our loan facilities from Kingsoft Corporation, Financial Leasing and other bank loans.
Tao Zou: Hello everyone, thank you and welcome all for joining Kingsoft Cloud's second quarter 2024 earnings call.
Speaker Change: Here are the details of our financial results.
Speaker Change: Total revenues for this quarter were 1,891.8 million RMB.
Tao Zou: 工友園方面,本季度實現收入, 12.3亿元,同比增长6.5% 環比增長4% 我们在小米金山生态 现在业务、供应链三个方向都卓有进展。 首先作为小米金山生态的唯一战略云平台 我们紧紧把握生态内企业用云的业务机会,本季度来自小米及金山的收入贡献占比20%,达3.7亿元,同比增长36.9%,其次, AI業務繼續發力,本季度AI收入大幅增長至3.3億元人民幣,達到 达到QE AI收入的两倍,占公有云收入比例达26.3% 处于行业领先地位 客户行业分布多元化进一步提升,包括大模型公司,自动驾驶,互联网应用等。 我们已建立起具备相当规模的算力资源 大规模超算网络组网能力业内领先,能够满足万卡签证。 關卡級別,超算積群的主網托服 建設完善的供應鏈體系,保障至上資源,此規模。 控制材料成本 充分利用, 中西部数据中心资源相较东部核心城市数据中心成本大幅下降 我们将继续 对内严控采购成本,拓展供应商覆盖范围,寻找市场最优价格和服务组合。 In terms of public cloud services, revenues reached RMB 1.23 billion this quarter, representing a year-over-year increase of 6.5 percent and a quarter-over-quarter increase of 4 percent.
Speaker Change: a three point one percent increaseed year over year of which revenues from public counservices were one thousand two hundred and thirty four point five mayly r andb up four percent
Tao Zou: We have seen positive outcomes across our three priorities for public cloud services, namely, the Xiaomi and Kingsoft ecosystem. AI Businesses and Supply Chain, First of all, serving as the sole strategic cloud platform within the Xiaomi and Kingsoft ecosystems. We firmly grasp the cloud business opportunities within the ecosystem. This quarter, revenue contribution from Xiaomi and Kingsoft reached 20%, amounting to RMB370 million, and witnessed a year-over-year increase of 36.9%.
Tao Zou: Secondly, AI businesses continue to bear fruit. In the first quarter, AI revenue surged to RMB 326 million, doubling the amount in the first quarter and accounting for 26.3% of public cloud revenues, an industry-leading position.
Speaker Change: From 1187.4 million RMB last quarter, primarily driven by the growth in AI-related revenues to 326 million RMB.
Speaker Change: Revenue from enterprise cloud services reached 657.2 million RMB up from 588.2 million RMB last quarter, due to accelerated project delivery this quarter. We have continued to enhance our cost control, expanding our supply base to improve services quality and procurement prices. Total cost of revenue decreased by 3.4% year-over-year and remained stable quarter-over-quarter at 1,573.4 million RMB. IDC costs dropped significantly by 14.4% year-over-year from 860.7 million RMB to 728.2 million RMB this quarter, reflecting the strategic scaling down of our CDS services and optimized utility of rack usage. Depreciation and amortization costs increased from 202.1 million RMB in the same period of last year to 265.9 million this quarter, meaning due to the depreciation of new servers acquired. Solution development and services costs increased by 8.4% year-over-year from 452.9 million RMB to 491.1 million RMB due to the solution personnel expansion of Camelot, which was in line with the revenue growth. Fulfillment costs and other costs were 37.6 million RMB and 50.6 million RMB this quarter, respectively. Our adjusted growth profit for the quarter was 323.4 million RMB, a 56.4% increase year-over-year, with an adjusted growth margin of 17.1%. This marks a new record and the eighth consecutive quarters of steady margin improvement, up from 11.3% last year and 16.8% last quarter. In terms of expenses, excluding share-based compensation and impairments of long-lived assets, our total adjusted operating expenses were 555.3 million RMB, slightly increased by 3.2% year-over-year and 18.3% quarter-over-quarter, of which our adjusted R&D expenses were 200.1 million RMB, a 3.7% increase from last quarter due to the personnel cost increase. Adjusted selling and marketing expenses were 117.5 million RMB, up from 97.9 million RMB last quarter, representing 6.2% of total revenues. Adjusted G&A expenses were 237.7 million RMB, compared to 178.7 million RMB last quarter. As of June 30, 2024, our cash and cash equivalents were 183.78 billion RMB, providing strong funding for economic and artificial intelligence investments.
Tao Zou: Our AI customer base also further diversified, including large language model companies, self-driving, internet applications, and others.
Speaker Change: Revenues from enterprise cloud services reached 657.2 million RMB, up from 588.2 million RMB last quarter due to accelerated project deliveries this quarter.
Tao Zou: We have established a substantial computing resource pool, leading the industry in large-scale network capabilities, capable of supporting the networking topology of supercomputing clusters at the 10,000-chip level.
Speaker Change: We have continued to enhance our cost control, expanding our supply base to improve services quality and procurement prices.
Speaker Change: total cost of revenue decreased by 3.4% year-over-year and remained stable quarter-over-quarter at 1,573.4 million RMB
Tao Zou: Thirdly, we built a comprehensive supply chain system, securing the scale of a stable intelligent computing resource pool and managing procurement costs. By fully utilizing data centers resources in central and western regions of China, costs are significantly reduced compared to the data centers in the core cities in the east. Meanwhile, we strictly control internal procurement cost.
Tao Zou: Expand coverage of suppliers and seek the best combination of price and quality.
Speaker Change: iddc costs dropped significantly by fourteen point four percent over year for eight hundred eight eight hundred and sixty point seven million r andb
Tao Zou: 行業運營方面,本季度實現收入6.6億元。 公共服務領域我們積極把握政務員國資源的項目機會 针对政务企业两类应用场景,以模型能力大数据协作办公为底座,推行标准化运营。 在塞迪顧問2020年6月發布的中國政務員市場研究報告中, 公司位列, 行业领导者象限 IDC 中國政務員服務, 運營服務市場報告中位列行業前六,體現了行業市場對於公司產品能力市場份額的認可。 本季度,我們實現了大模型在公共服務部門落地的標竿項目推進,將會助力北京, 助建委打造12345智能決策,智慧問述等項目打造。 提升住建委在汇总统计归类12345热线数据的准确性和高效性,提升服务质量和响应速度。 数字健康领域,长洲健康云迎来第五期扩容项目,将满足客户新型业务上线。 影像延伸存储的需求,充分证明,证验证了行业云客户及项目的长期合作, 建设运营的发展潜力 在AI行业应用领域,我们投资建设的子公司金山智能逐步开始业务推进,重点把握企业AI软件应用和交付部署的业务机会。 行业模型方面,公司与中国领先的大成律师事务所建立战略合作关系,共同成立了法律人工智能联合实验室。 律师业务数字化转型迈出了跨越性的一步, Moving on to Enterprise Cloud Services, where revenues amounted to RMB657 million, public services space, we have actively pursued opportunities within public service cloud and state-owned enterprise cloud. Implementing Standardized Operations and Maintenance, We have leveraged our core components, such as models, big data, and workspace collaboration, targeting use cases in the public service and enterprise domain.
Tao Zou: The China e-government cloud market research report released in June 2024 by CCID, a leading consulting company in China.
Tao Zou: We are ranked in the leaders quadrant.
Tao Zou: In the China e-Government Cloud Operations Service Market Report by IDC, we ranked at the top six companies in the industry. Such ranks reflect recognition from the industry market for our product capabilities and market share.
Tao Zou: This quarter, we have promoted the benchmark project of implementing large language models in public services sector, which will assist the Beijing Municipal Commission of Housing and Urban Rural Development in building the 1-2-3-4-5 hotline intelligent decision making and smart query and data projects, enhancing the accuracy and efficiency of the commission in summarizing statistics and categorizing the 1-2-3-4-5 hotline data and improving the service quality and response speed.
Speaker Change: to 728.2 million RMB this quarter, reflecting the strategic scaling down of our CDS services.
Tao Zou: In the healthcare space, Changzhou Health Cloud has launched its Phase 5 expansion. It will meet the requirements of new business scenarios and the needs of extended archives of healthcare images, fully validating the potential to establish long-term cooperation for construction and operation of industry cloud customers and projects.
Speaker Change: and Optimize Utility of a RAC Usage.
Speaker Change: Depreciation and amortization costs increased from 202.1 million RMB in the same period of last year to 265.9 million this quarter, mainly due to the depreciation of new servers acquired.
Speaker Change: solution the hotheror mtenna services costs increased by eight point four percent ke overyear from to four hundred and fifty two point nine million r nb
Speaker Change: to 491.1 million RMB due to the solution personnel expansion of Camelot, which was in line with the revenue growth.
Speaker Change: Fulfillment costs and other costs were 37.6 million RMB and 50.6 million RMB this quarter, respectively.
Speaker Change: our adjusted gross profit for the quarter where a three hundred and twenty three point four milliona rb of fifty-six point four percent increase year-over-year with an adjusted gross margin on a seventeen point one percent
Speaker Change: This marks a new record and the eighth consecutive quarters of steady margin improvement, up from 11.3% last year and 16.8% last quarter.
Speaker Change: In terms of expenses, excluding share-based compensation and impairments of long-lived assets.
Speaker Change: Our total Adjusted Operating Expenses was 555.3 million RMB, slightly increased by 3.2% year-over-year, and 18.3% quarter-over-quarter.
Speaker Change: of which our adjusted R&D expenses were 200.1 million RMB.
Speaker Change: 3.7% increase from last quarter due to the personnel cost increase.
Speaker Change #100: Justly Selling and Marketing Expenses
Speaker Change #100: were 117.5 million RMB, up from 97.9 million RMB last quarter, representing 6.2% of total revenues.
Speaker Change #100: adjusted a generate expenses were two hundred and thirty seven pointy seven minute r and b compared to one hundred and seventy eight point seven minute ar in d last quarter
Speaker Change #100: As of June 30, 2024, our cash and cash equivalents totaled 1,837.8 million RMB, providing strong equity for operations and AI investments.
Chairman Zhou: This week's capital expenditure is 65.48 billion RMB to support infrastructure investment in ecological intelligent enterprises. Looking ahead, we still adhere to the principles of high quality and stable development. We will continue to enhance income quality, reduce costs and expenses, and improve productivity. This concludes our meeting. Thank you for your attention. We can now take your questions. Please ask your questions in both Chinese and English. Chief Executive, please start. Thank you. Thank you. To ask a question, you must press **1 and **1 on your phone and wait for your name to be announced. To withdraw your question, you can press **1 and **1 again. Thank you. We now accept your first question from Xiao Dan of CICC. Please go ahead, your line is open. Hello, Chairman Zhou. Thank you for taking my questions. I have two questions. The first question is about our capital expenditure. I see that our total capital expenditure for the first two quarters of this year should have exceeded the level of the entire last year. How do we view the pace of capital expenditure for the subsequent quarters? The second question is about our AI-related business. The company has been actively investing in AI-related computing power since last year. As of now, what is our return on investment? What is the company's outlook for the contribution of AI revenue for the whole year? I will quickly translate my questions. Thank you to the management for taking my questions. I have two questions. First, please update us on your capital expenditure guidance for the next two quarters. Second, please provide more information on your AI investment ROI and your expectations for AI revenue contribution for the year. Thank you. Thank you, Xiao Dan. I may answer the first question about capital expenditure. First, I think you correctly pointed out that this year we are accelerating investment in areas we believe have very good potential for commercial development opportunities. Most of the capital expenditure, I think about 95% or even higher, is directly related to AI investment, which we believe is a very positive opportunity. So, at this moment, we cannot provide complete guidance for the full year's capital expenditure investment, but I think we can look at it from two different areas. First, in this quarter, you may also notice that we recorded a cash inflow from administrative aspects, about 15.1 billion RMB. I think you have already seen that capital expenditure investment has entered good areas and has turned it into a positive inflow from administrative cash flow. So this is actually the first step.
Speaker Change #100: however spenditures for this quarter was six hundred fifty four point eight minute reflecting our investments in infrastructure to support our sustainable ai business
Tao Zou: AI industry applications.
Tao Zou: I am Zou Tao, CEO of Kingsoft Cloud. Looking back on the two years since August 2022, our entire Kingsoft Cloud team has firmly executed the high quality and sustainable development strategy, and the company has undergone a complete transformation.
Tao Zou: Fifth, taking long-term perspectives, as Wuhan R&D Center quickly scaled up to hosting approximately 30% of the entire workforce, including Camelot, laying a solid foundation for sustained technological leadership, as well as completing dual primary listing on Hong Kong Stock Exchange, followed by inclusion into the Hang San Composite Index and Hong Kong Stock Connect, solidifying our capital markets infrastructure.
Tao Zou: Kingsoft AI, a subsidiary invested and established by us, has gradually started to promote its business, focusing on seizing business opportunities in enterprise AI software applications and delivery deployment.
Tao Zou: In terms of industry models, we officially launched a strategic cooperation with Denton's law firm, a leading law firm in China, and established the Joint Laboratory of Legal Artificial Intelligence, taking a leap forward in digital transformation of law industry.
Speaker Change #100: Looking ahead, we remain committed to the principle of high quality and sustainable development.
Tao Zou: 产品技术方面,我们继续秉持技术利益,聚焦于打造核心产品的一流客户体验。 AI方面,基于AI客户越发增多的数据清洗需求,我们对裸金属、对象存储等产品进行整合。 形成针对文本、图片、视频等类型数据清洗的整体解决方案,满足预训链数据集、微调数据集成。 数据及生成对于数据清洗的需求和要求 行業雲領域,銀河雲推出了低成本,高密度的專有雲平台。 标准配置,高密集型的单实力成本实现下降最高64% 實力密度提升最高300% In terms of product and technology, we uphold the principles of building success based on technology and innovation, focusing on delivering fast and fast customer experience across our core product offerings.
Tao Zou: 下面我向大家具体介绍2024年第二季度的业绩情况 调整后毛利额达人民币3.2亿元,同比增长56.4%,调整后毛利率达17.1%,实现了连续8个季度持续稳步提升,再创历史新高, 调整后EBITDA额达人民币6059万元,调整后的EBITDA率达3.2% 在一季度EBITDA转正基础上继续稳步向好,且同比大幅提升6.5个百分点,经营现金净流入1.5亿元,经营活动造血能力继续得到证明, 诸多财务业绩指标的提升,标志着金山云高质量可持续发展战略得到的落实,公司发展迈入新阶段,为2024年及以后的长期健康发展奠定了坚实基础 高价格添加产品和服务的收入增长,与我们的CDN服务的严格调整带来的压力增长,与我们的CDN服务的严格调整带来的压力增长, 公有云方面,本季度实现收入12.3亿元,同比增长6.5%,环比增长4%。我们在小米,金山生态,AI业务,供应链三个方向,都卓有进展。 首先,作为小米,金山生态的唯一战略云平台,我们紧紧把握生态内企业用云的业务机会。本季度,来自小米及金山的收入贡献占比20%,达3.7亿元,同比增长36.9%。 其次,AI业务继续发力,本季度,AI收入大幅增长至3.3亿元人民币,达到QE AI收入的两倍,占公有云收入比例达26.3%,处于行业领先地位。客户行业分布多元化进一步提升,包括大模型公司,自动驾驶,互联网应用等。 我们已建立起具备相当规模的算力资源池,大规模超算网络组网能力业内领先,能够满足万卡级别超算集群的组网托付。 第三,建设完善的供应链体系,保障自算资源此规模,控制采购成本,充分利用中西部数据中心资源,相较东部核心城市数据,中心成本大幅下降。 我们将继续对内严控采购成本,拓展供应商覆盖范围,寻找市场最优价格和服务组合。 在公共互联网服务方面,成本达到今年度的RMB1.23亿美元,代表了6.5%的年度增长和4%的四分之一增长。 我们也建立了一个充分的数据资源框架,带领业界进行大规模的网络技术,能够支援超级数据框架的网络设施在10,000架级。 第三,我们建立了一个完整的供应链系统,保持了稳定的智能数据资源框架,并管理人类的客户需求。 By fully utilizing data centers' resources in central and western regions of China, costs are significantly reduced compared to the data centers in the core cities in the east.
Tao Zou: Meanwhile, we strictly control internal procurement costs, expand coverage of suppliers, and seek the best combination of price and quality.
Tao Zou: 行业云方面,本季度实现收入6.6亿元。公共服务领域,我们积极把握政务云、国资云的项目机会。 针对政务、企业两类应用场景,以模型能力、大数据、协作办公为底座,推行标准化运营。 在塞迪顾问2020年6月发布的中国政务云市场研究报告中,公司位列行业领导者象征。 在IDC中国政务云服务运营服务市场报告中,位列行业前六,体现了行业市场对于公司产品能力、市场份额的认可。 本季度,我们实现了大模型在公共服务部门落地的标杆项目推进,将会助力北京住建委打造12345智能决策、智慧问述等项目打造。 提升住建委在汇总统计归类12345热线数据的准确性和高效性,提升服务质量和响应速度。 数字健康领域,长洲健康云迎来第五期扩容项目,将满足客户新型业务上线、影像延伸存储的需求,充分验证了行业云客户及项目的长期合作、建设运营的发展潜力。 我们利用了我们的四个元素,例如模型、大数据和工作室合作,为公共服务和企业领域的利用案例提供目标。 在中国的E-政府互联网市场研究报告,于2024年6月发布的CCID,中国的领导商公司中,我们是领导者阶级。 在中国的E-政府互联网服务市场研究报告中的IDC,我们是互联网市场领域的顶级六家公司。 这些领位显示了互联网市场对互联网产品的能力和市场分享的认可。 并增强公共服务区的精确性和效率,并总结数据,并分析12345号线智能决策,并提高服务品质量和反应速度。 In healthcare space, Changzhou Health Cloud has launched its Phase 5, expansion. It will meet the requirements of new business scenarios and the needs of extended archives of healthcare images, fully validating the potential to establish long-term cooperation for construction and operation of industry cloud customers and projects.
Tao Zou: In AI industry applications, Kingsoft AI, a subsidiary invested and established by us, has gradually started to promote its business, focusing on seizing business opportunities in enterprise AI software applications and delivery deployments.
Tao Zou: In terms of industry models, we officially launched a strategic cooperation with Denton's law firm, a leading law firm in China, and established the Joint Laboratory of Legal Artificial, Intelligence, taking a leap forward in digital transformation of law industry.
Speaker Change #100: We will continue to enhance revenue quality, reduce costs and expenses, and improve profitability.
Tao Zou: In terms of product technology, we continue to uphold the technological, interests, focusing on the first-class customer experience of creating core products.
Tao Zou: In terms of AI, based on the increasing data cleaning needs of AI customers, we have integrated products such as rotary metal, object storage, and other types of data cleaning solutions for text, images, videos, etc.
Tao Zou: In terms of technology, we uphold the principles of building success based on technology and, innovation, focusing on delivering fast and fast customer experience across our core product offerings.
Tao Zou: In AI space, in response to surging data cleansing demands from AI clients, we have integrated products like bare metal and object storage to create a holistic solution for data cleansing accommodating text, images, and videos. This multimodal solution is tailored to meet the data cleansing requirements for the creation of both pre-training and fine-tuning datasets.
Tao Zou: In response to surging data cleansing demands from AI clients, we have integrated products like bare metal and object storage to create a holistic solution for data cleansing accommodating text, images, and videos. This multimodal solution is tailored to meet the data cleansing requirements for the creation of both pre-training and fine-tuning data sets.
Speaker Change #101: This concludes our prepared remarks. Thanks for your attention. We are now happy to take your questions. Please ask your questions in both Chinese Mandarin and English, if possible. Operator, please go ahead. Thank you.
Tao Zou: NFRI Cloud Space, The Galaxy Stack platform released a proprietary cloud platform with low cost and high density. The High Density version has achieved a maximum reduction of 64% in cost per instance and an increase of up to 300% in instance density.
Speaker Change #102: Thank you. To ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced and to withdraw your question you can press star 1 and 1 again.
Tao Zou: In enterprise cloud space, the Galaxy Stack platform released a proprietary cloud platform with low cost and high density.
Tao Zou: Compared to original standard configuration, the high density version has achieved a maximum reduction of 64% in the cost per instance and an increase of up to 300% In summary, after two years of, step-by-step implementation of the high quality and sustainable development strategy, Kingshore Cloud Fundamentals have undergone a complete transformation.
Tao Zou: 總體而言, 经过过去两年高质量可持续发展战略的坚定实施 西山云的基本面已经焕然一新, 展望未来,我们将继续提升盈利和现金造血能力。 与小米集团生态深度合作, 强化武汉研发中心,全面理解和探索新AI机遇,从而为我们的客户,股东,员工和其他利益方持续创造价值。 接下来有请CFO Perry为大家介绍二季度财务业绩,谢谢。 In summary, after two years of step-by-step implementation of the high-quality and sustainable development strategy, Kingsoft Cloud's fundamentals have undergone a complete transformation.
Tao Zou: Looking forward, we will continue to enhance our profitability and cash-generating capabilities, deepen cooperation with Xiaomi and Kingsoft's ecosystem, strengthen Wuhan Research Center, and develop comprehensive understanding of new AI and explore such opportunities, thereby continuously creating value for our customers, shareholders, employees, and other stakeholders.
Speaker Change #102: Thank you. We will now take our first question.
Speaker Change #103: this is from the line of shell dan dang from cicc please go ahead line is open
Speaker Change #104: Good evening, Mr. Zhou, Henry Clark, and Nicole. Thank you for accepting my questions. I have two questions to ask. The first question is about our capital expenditure. I noticed that our capital expenditure for the first two quarters of this year has already exceeded the total for the entire last year. How do we foresee the pace of capital expenditure for the upcoming quarters?
Speaker Change #105: are a ho govern and you going woman at j ai somewhere in a year also serious once to young howutshould or usually that ddid a whole r someone a sudly that downwould sense sure i work j good whole work val issues of younger
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Speaker Change #107: Then I'll quickly translate it.
Speaker Change #108: So thanks management for taking my questions and I got two questions here. First of all, could you please update us on your CapEx guidance for the next two quarters? And secondly, could you give us some color on the ROI of your AI investment and how is your expectation for the AI revenue contribution for the full year? Thank you.
Henry He: I will now pass the call over to our CFO Henry to go over our financials for the second quarter of 2024.
Speaker Change #109: Thank you, Xiaodan. I'm going to answer the first question regarding the Capex.
Tao Zou: Looking forward, we will continue to enhance our profitability and cash, generating capabilities, deepen cooperation with Xiaomi and Kingshore ecosystem, strengthen Wuhan Research Center, and develop comprehensive understanding of new AI and explore such opportunities, thereby continuously creating value for our customers, shareholders, employees, and other
Speaker Change #110: So I think, first of all, I think you are, yeah, yeah.
Speaker Change #110: point out correctly, this year we're actually accelerating our investment in, we think,
Tao Zou: stakeholders.
Speaker Change #111: a very good area of
Speaker Change #111: Azure Business Roles and Opportunities.
Speaker Change #111: The most of the cutbacks, I think probably over 95%, or even higher, are relating directly to the AI investment, which we think is a very good positive.
Henry He: Thank you.
Speaker Change #113: opportunities philss
Henry He: 谢谢啊,周总, Thank you, Mr. Zhao, and welcome everyone for joining the call.
Speaker Change #113: so
Speaker Change #113: You know at this moment while we cannot give a full guidance for the full year capex investment, but
Tao Zou: I will now pass the call over to our CFO Henry to go over our
Henry He: Now I will walk you through our financial results for the second quarter of 2024.
Speaker Change #114: i think we can probably look into two different areas first of all years
Speaker Change #115: for this quarter you may also notice that we recorded a net cash inflow from operation side which is around of our one hundred and fifty one millutea r andb
Speaker Change #115: And I think you can already see that the CABAX investment into the good area of business already converted into a positive inflow from operation cash flow. So that's actually the first point. So the second point is we also expanded our financing channels.
Henry Huang: financials for second quarter 2024.
Henry He: We would like to highlight three key areas of progress.
Henry Huang: Thank you.
Chairman Zhou: The second point is that we have also expanded our financial channels. For example, you may have noticed that last year we received financial support, and at the same time, we also had the possibility of leasing from Xiaomi Group. However, this year, especially in the past two halves, we have also received significant support. For example, from international policy banks, state-owned financial institutions, including banks and leasing companies. Therefore, in this way, we do not limit our investment amount, we just look at our average cash value today. Therefore, my view is that with these additional opportunities and financial channels, we can actually restart, and we can achieve very high financial potential to support AI investments. Secondly, for every dollar we invest today, our ROE and continuous cash flow, in order to ensure these profits and increase profits, we will be very long-term and very safe. Thirdly, we also use our capabilities to ensure a good ecosystem for our customers, especially AI companies in the Chinese market. I think we are moving forward, with the profits and funding sources we have, we can integrate these two fields in the long term. Finally, I think Mr. Xi'ao Dan, you might want a ballpark number. I can mention that the total opening amount for this year, if you compare it with a ballpark number, it will almost be a ballpark number every year, which will actually have a very good possibility of turning into rapid profit growth in the second half of the year. Thank you. Then for the second question, please let Mr. Zhou Tao answer it for you. Thank you. Okay. Hello, Professor. Well, I still want to talk more about it, and later Liu Tao can also add some comments. Actually, our AI is divided into three parts. I now summarize it as shared information. Yes.
Henry He: First, we are very pleased with ongoing improvements in our financial matrix.
Henry Huang: Thank you, Ms. Zou, and welcome everyone for joining the call.
Henry He: By applying the first principle thinking, we are committed to a profit-focused approach, have led to consecutive increases in our gross profit. Gross Margin, EBITDA Profit and EBITDA Margin over the past several quarters. This quarter, our adjusted gross margin reached 17.1%, marking eight consecutive quarters of steady growth, while adjusted gross profit hit 333.4 million RMB.
Henry Huang: Now I will walk you through our financial results for the second quarter of 2024.
Henry Huang: We would like to highlight three key areas of progress.
Henry Huang: First, we are very pleased with ongoing improvements in our financial matrix. By applying the first principle thinking, we are committed to a profit-focused approach, that has led to consecutive increases in our gross profit, gross margin, EBITDA profit, and EBITDA margin over the past several quarters. This quarter, our adjusted gross margin reached 17.1%, marking eight consecutive quarters, of steady growth, while adjusted gross profit hit 333.4 million RMB.
Speaker Change #115: For example, you also notice
Henry Huang: After turning a profit in adjusted EBITDA margin last quarter, we continued with this, positive trend with 60.6 million RMB in EBITDA and 3.2% in EBITDA margin, demonstrating our successful execution of a high-quality sustainable development strategy.
Henry Huang: Second, this quarter, our revenue reached 1,891.8 million RMB, reverting to a positive, increasing trend with a 3.1% increase, year-over-year increase, and a 6.5% rise quarter-over-quarter.
Henry Huang: By strategically adjusting our revenue mix in line with our high-quality and sustainable, development strategy, we have allocated more resources to develop high-value services. This quarter, our AI revenues grew to 326 million RMB, making up 26% of our total public, cloud services revenue, double the amount from last quarter.
Speaker Change #115: Last year, we secured the financing support from Kingsoft Group as well as the leasing potential opportunities from Xiaomi Group as well.
Henry Huang: We have established resilient supply chain, scalable computing power, and a long-term, partnership with customers to support our growing AI revenues.
Henry Huang: In response to costs, pressure, and a low margin, we have strategically reduced the, proportion of our CDN services to 19% of total revenue, down from 23% last quarter.
Speaker Change #115: But this year, especially in the last two quarters,
Speaker Change #115: We also get great support from, for example, the national policy banks, the state-owned financial institutions.
Speaker Change #115: including both banks and also the leasing companies.
Speaker Change #115: So in that way, we actually do not limit ourselves with a certain cap of the CABAC investments, just looking at the only amount of our cash balance today.
Speaker Change #115: So my point is, giving those additional opportunity and financing channels, we actually can reopen and have a very high ceiling of the financial capability we can get to support an AI investment.
Henry Huang: Third, we have recorded a net inflow of operating cash flow, amounting to 151.2 million RMB.
Henry He: After turning a profit in adjusted EBITDA margin last quarter, we continued with this positive trend. 60.6 million RMB in EBITDA and 3.2% in EBITDA margin, demonstrating our successful execution of a high quality sustainable development strategy.
Henry He: Second, this quarter, our revenue reached, 1,891.8 million RMB reverting to a positive increasing trend with a 3.1% increase year-over-year increase and a 6.5% rise quarter-over-quarter.
Henry He: By strategically adjusting our revenue mix in line with our high-quality and sustainable development strategy, we have allocated more resources to develop high-value services. Last quarter, our AI revenues grew to 326 million RMB.
Henry He: Making up 26% yw'r gwasanaethau cyhoeddus cyhoeddus cyhoeddus, doubled the amount from last quarter.
Speaker Change #115: The third point is, given the investment is long-term, we also measure very carefully regarding the profitability and sustainability of those investments.
Speaker Change #116: and at this moment we can have it to share most of ai clients are the well known main you'll probably also notice on the market
Henry He: We have established resilient supply chain, scalable computing power, and a long-term partnership with customers to support our growing AI revenue.
Henry Huang: We also secured various financial channels to support our AI business, including but, not limited to our loan facilities from Kingshore Corporation, financial leasing, and other bank loans.
Speaker Change #117: And the second, we do also have a very long-term contract from sales side, which can secure the incoming cash flow as well as the client opportunities, with the potential upside to secure more business from the same client as a recurring basis.
Henry He: In response to costs, pressure and a low margin, we have strategically reduced the proportion of our CDN services to 19% of total revenue, down from 23% last quarter.
Henry He: Third, we have recorded a net inflow of operating cash flow amounting to 151.2 million RMB.
Henry Huang: Here are the details of our financial results.
Henry He: We also secure various financial channels to support our AI business, including but not limited to our loan facilities from Kingsoft Corporation.
Henry He: 财务领导和其他代工人, Here are the details of our financial results. Total revenues for this quarter were 1,891.8 million RMB. 每年增長3.1% of which revenues from public cloud services were 1,234.5 million RMB, up 4%, from 1,187.4 million R&D last quarter, primarily driven by the growth in AI-related revenues to 326 million RMB.
Henry Huang: Total revenues for this quarter were 1,891.8 million RMB. A 3.1% increase year-over-year, of which revenues from public cloud services were 1,234.5 million, RMB, up 4% from 1,187.4 million RMB last quarter, primarily driven by the growth in AI-related revenues to 326 million RMB.
Speaker Change #118: So I remember first few quarters ago, we talked about recurring as the most important driver for our profitability. I think right now, given the AI, we do see that recurring revenue percentage are much higher if you compare with the old, so-called, the only ICE services in the old model we did before.
Speaker Change #118: So I think that...
Speaker Change #118: three areas i just mentioned and come to a conclusion that
Speaker Change #118: We do not limit ourselves with the cash we already have today. We can have more opportunity to increase investment with the capacity. Number two, every dollar we invest today, the ROE and also the recurring cash flow, to serve those liabilities and increase in the revenue will be very long-term and very secure.
Speaker Change #118: and the third is we also use our capacity to secure a good universe of the client
Speaker Change #119: especially the AI company in the market in China today. I think we are leading on the front with the revenues, with the financing sources we have, and we can match in those two sides for the long term going forward.
Speaker Change #120: But last note, I think Xiaodan you probably want to have a ballpark number, which I can mention that the total capex for this year will be always probably a few times if you look at it from ballpark number compared with last year, and that will actually have a very good possibility.
Henry He: Revenues from enterprise cloud services reached 657.2 million RMB up from 558.2 million RMB last quarter, due to accelerated project deliveries this quarter.
Henry He: We have continued to enhance our cost control, expanding our supply base to improve services quality and procurement price. Total cost of revenue decreased by 3.4% year-over-year and remained stable quarter-over-quarter at 1,573.4 million RMB. IDC costs dropped significantly by 14.4% year-over-year from 860.7 million RMB, to 728.2 million RMB this quarter, reflecting the strategic scaling down of our CDS service, optimize utility of a rack usage.
Henry He: Depreciation and amortization costs increased from 202.1 million RMB in the same period of last year to 265.9 million this quarter, mainly due to the depreciation of new servers acquired.
Henry He: Solution development and services cost increased by 8.4% year-over-year from 452.9 million RMB, to 491.1 million RMB due to the solution personnel expansion of Camelot, which was in line with the revenue growth.
Henry He: Fulfillment costs and other costs were 37.6 million RMB and 50.6 million RMB this quarter respectively.
Henry He: Our adjusted gross profit for the quarter was 323.4 million RMB, a 56.4% increase year-over-year, with an adjusted gross margin of 17.1%. It marks a new record and the eighth consecutive quarters of steady margin improvement, up from 11.3% last year and 16.8% last quarter.
Speaker Change #120: to convert to an accelerated revenue growth on the top line in the coming quarters.
Henry He: 郭文貴議員, Excluding share-based compensation and impairments of long-lived assets.
Henry He: Our total adjusted operating expenses was 555.3 million RMB, slightly increased by 3.2% year over year, and 18.3% quarter over quarter, of which our adjusted R&D expenses were 200.1 million RMB. 3.7%增加, from last quarter due to the personnel cost increase.
Henry He: 郭文貴議員, were 117.5 million RMB up from 97.9 million RMB last quarter, representing 6.2% of total revenue.
Henry He: Adjusted G&A expenses were 237.7 million RMB compared to 178.7 million RMB last quarter.
Henry He: As of June 30, 2024, our cash and cash equivalent, totaled 1,837.8 million RMB, providing strong equity for operations and AI investment. Capital expenditures for this quarter was 654.8 million RMB, reflecting our investments in infrastructure to support a sustainable AI industry.
Speaker Change #121: Then, please have Mr. Zhou Tao answer the second question.
Henry He: Thanks for your attention.
Henry He: Looking ahead, we remain committed to the principle of high quality and sustainable development.
Henry He: We are now happy to take your questions.
Henry He: We will continue to enhance revenue quality, reduce costs and expenses, and improve profitability.
Operator: Please ask your questions in both Chinese, Mandarin, and English if possible.
Henry He: Thank you.
Operator: Operator, please go ahead.
Henry He: This concludes our prepared remarks.
Operator: Thank you.
Speaker Change #122: So, I still want to think it over and discuss it in detail. Later, Liu Tao can also add some comments. Actually, we should divide it into three parts.
Operator: Thank you.
Operator: To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.
Operator: And to withdraw your question, you can press star 1 and 1 again.
Operator: Thank you.
Operator: We will now take our first question.
Xiaodan Zhang: This is from the line of Xiaodan Zhang from CICC.
Xiaodan Zhang: Please go ahead, your line is open.
Xiaodan Zhang: 呃,周总,Henry Clark,Nicole,晚上好,感谢接受我的提问啊,我这边有两个问题想请教一下啊,那第一个问题是关于我们的这个资本开支啊,那我看到我们今年前两个季度的资本开支总和应该是超过了去年全年的水平啊,那我们现在对于后续季度的这个资本开支的节奏是如何展望的啊,然后第二个问题是关于我们的这个AI相关的业务啊,那公司其实从去年开始就一直在啊,积极的投入这个 AI相关的算力,那截止到目前去看我们的这个投入回报率是怎么样的,那公司今年对于全年的这个AI收入的贡献如何展望啊,那我快速的翻译一下我的问题啊, 那我快速的翻译一下我的问题啊, Thank you, Xiaodan.
Speaker Change #123: I now summarize it as joint training.
Speaker Change: The supply of computing power for VRI's large model training, as mentioned earlier, I talked about the big city in my previous speech. Actually, we are not only focusing on the legal field but also making substantial progress in auditing, banking, and enterprise-level model applications. We have not disclosed this yet, but we have nearly a year of practice in model training with VRI's domestic computing power. Additionally, the government model for office use has been officially launched and is in practical use. From these three dimensions, we can see the current progress from a financial perspective. Of course, we have also paid attention to Yongshang. If we compare year-on-year, our growth rate is 10 times, over a thousand, which is not very meaningful because our scale was still small in the first half of last year. However, compared to QE, we still have doubled our growth. Overall, the numbers currently reflect the supply aspect. In fact, with our future use in finance, auditing, and legal industries, we believe there will be even better prospects and space. The overall improvement in the company's gross profit margin is also largely benefited from this. Looking ahead, you also mentioned the future prospects of AI. From the information we currently have, we mainly talked about a few industries. Besides model training, we focus on supply. In autonomous driving, including the automotive industry's autonomous driving and parasitic technology, parasitic intelligence, which is essentially the robotics field, we believe there is still considerable space. Everyone is well aware of the impact since Tesla's FSD release. We judge that almost all the leading new car manufacturers, including Xiaomi, have plans to layout in this area. We have had in-depth communications with several of them, so the future growth space is still very large.
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Speaker Change #125: it was
Speaker Change #125: she un handle on to what goverven and again jud j to pendle about home that is and bo onto the leu of the frrenches o ession gtaking home
Speaker Change #125: We are also applying models in the business sector.
Speaker Change #125: It should be said that some substantial progress has been made, but it may not have been disclosed yet. In terms of training and our office, we aim for domestic combat capabilities.
Speaker Change #126: more in ala to the u joining ganda does 't subure
Speaker Change #127: And today the office's administrative model has been officially launched and put into practical use.
Speaker Change #128: From these three dimensions, this is the current progress we see financially. Of course, we also paid attention to Yongshang's. Actually, if we compare year-on-year, our total number is...
Speaker Change #128: soval
Speaker Change #128: Ten times over a thousand doesn't mean much because our scale was still small in the first half of last year. However, compared to QE, we still achieved double the growth.
Speaker Change #129: So overall, the current numbers mainly reflect the supply side. In fact, considering the future usage as well.
Speaker Change #130: we arehave in a generome that in the centia going to be str
Speaker Change #130: We still believe in these industries
Henry He: I will answer the first question regarding CapEx. So, I think, first of all, I think you pointed out correctly, this year we are actually accelerating our investment in, we think, a very good area of cap.
Speaker Change #131: There will be better prospects and opportunities
Henry He: 热量吸收漫步挑战, Unknown Speaker 00.001 00.001 00.001, I think probably over 95% or even higher are relating directly to the AI investment.
Henry He: 郭台銘, 非常感謝.
Speaker Change #131: Then the rate of return, you just asked about the rate of return, indeed I talked about this last week.
Speaker Change #131: Overall, as we just mentioned, the gross profit margin of the citizen sector is generally higher compared to some traditional ones.
Speaker Change #131: younear japa hasn't has a dollars the malbunddo ped up and just don't have a algo tber gi ' twenty the de mo that he some gets adthought good soe
Henry He: 大家好, You know, at this moment, while we cannot give a full guidance for the four-year CapEx investment, but I think we can probably look into two different areas.
Henry He: First of all is, for this quarter, you may also notice that we recorded a net cash inflow from operation side, which is around about 151 million RMB.
Henry He: And I think you can already see that the Quebec's investment into the good area of business already converted into a positive inflow from operations.
Speaker Change #131: yeah
Speaker Change #131: Then we need to look ahead. You just talked about the future prospects of the Communist Party. In my personal opinion, based on the information currently available,
Speaker Change #131: yeah
Speaker Change #132: Actually, we focused on discussing several industries, apart from this kind of model training.
Speaker Change #132: Let's first talk about 'common', first talk about 'common', this dimension of 'common'.
Speaker Change #133: one day ciilpartic other
Speaker Change #133: gashion
Speaker Change #134: a at bble
Speaker Change #134: The driving in the automotive industry, including this so-called Jusheng Technology and Jusheng Intelligence, actually belongs to the field of robotics.
Speaker Change #134: In fact, we all believe there is still considerable room for improvement.
Speaker Change #134: Everyone is very clear about autonomous driving. Actually, since Tesla's FSD was released, it has been quite shocking. We judge that almost all of the...
Speaker Change #135: These newly designed car manufacturers in the head, including Xiaomi.
Speaker Change #136: I think everyone has plans to make arrangements for this. In fact, we have already had in-depth discussions with a few companies, so the growth potential in this area is still very large.
Speaker Change: Yes, actually regarding the robotics sector, I think, according to the information we have, at least one company has recently achieved 3 billion in financing. So, the large model itself in the field of robotics has endowed robots with intelligence. We also judge that this could be a broader market and space beyond the automotive industry. We have been closely monitoring this and have actually made some substantial progress, although it hasn't been reflected in Q2 yet. Therefore, we believe this area has a very large potential for future development. But in fact, as these projects have basically been implemented, the remaining part is to gradually showcase the results as the cooperation deepens. We still firmly believe in the path of empowering enterprises with AI, or what we call AI entering various industries. This is a more imaginative blue ocean market. So overall, I still maintain what I said in the previous few quarters. Since the National Games in June last year, I have said that we have fully entered the AI era, which we call All in AI. From the strategic upgrade over the past year, we have made very significant progress, and our confidence in the future has also grown stronger over this year. We should say that our confidence is more accurate, our fighting spirit is stronger, and as Harry just introduced, we will continue to invest steadily in developing some subsequent expenditures based on the expansion needs of our customers and the needs of enterprises empowered by our AI.
Speaker Change #137: she s they want t and w afr ica
Speaker Change #137: As far as we understand the situation, at least for now
Speaker Change #138: gap tre sturally 're also us
Speaker Change #139: Yes, so the large model itself in the field of robotics endows robots with intelligence. This in itself involves judgment and memory.
Speaker Change #140: Beyond the application in the automotive industry, there may be a broader market and space.
Speaker Change #141: me if you get choason
Speaker Change #142: 's a day that day day day
Speaker Change #143: Closely monitor and actually in
Speaker Change #144: There has been some substantial progress, but it hasn't been reflected in Q2 yet, so we believe this part is also
Speaker Change #145: The future holds immense possibilities.
Speaker Change #146: So this refers to the supply part. As for the usage part, we also believe that, along with our...
Speaker Change #147: With the in-depth strategic cooperation with several key coastal clients, the results will gradually be revealed next year and the year after. This is actually a very important matter for us.
Speaker Change #148: the dviriniency that bestestimass of or someb are canic
Speaker Change #149: the tears the stgive
Speaker Change #150: they so you want s ar me' way to
Speaker Change #150: It was discussed with great emphasis, but in fact, as these projects have basically been implemented, what remains is the deepening of cooperation and the gradual presentation of results. We still firmly believe in this path of empowering enterprises.
Speaker Change #150: Or call it AI entering thousands of industries, this is a more imaginative idea.
Speaker Change #151: this is a not hyengen
Speaker Change #152: So in summary, it means
Speaker Change #153: I will continue what I have said in the past few quarters. Since the all-hands meeting of Kingsoft Cloud last June , I have said that we are fully entering the AI era, which we call 'All in AI'. From the perspective of the past year or so, this strategic upgrade...
Speaker Change #154: Significant progress has been made, and our confidence in the future has also grown over the past year. We should say that...
Speaker Change #155: With more confidence and stronger fighting spirit, the arrangements will be as Harry just introduced, and we will finish shooting at the scheduled time.
Henry He: So that's actually a first.
Henry He: 第二點是, We also expanded our financing channel.
Speaker Change #156: fanction okay let me just translations the translate of mr osetsaid so in terms of i really wanted to take this opportunity to elaborate a little bit about my overall s
Henry He: For example, you also notice...
Henry He: Last year, we secured the financing support from Kingsoft Group, as well as the leasing potential opportunities from Xiaomi Group as well.
Henry He: But this year, especially in the last two quarters, we also got great support from, for example, the national policy banks, the state-owned financial institutions, including both banks and also the leasing companies.
Henry He: So in that way, we actually do not limit ourselves with a certain cap of the cashback investments, just looking at the only amount of our cash balance today.
Henry He: So my point is, giving those additional opportunity and financing channels, we actually can reopen and have a very high ceiling of the financial capability we can get to support the AI.
Henry He: The third point is, given the investment is long term, we also measure very carefully regarding the profitability.
Henry He: And at this moment, we are happy to share most of our AI clients are well-known names, probably also noted on the market.
Speaker Change #157: So in my mind, it's really about three dimensions. One is the supply of computing power. The second is the inference, which is the application of artificial intelligence. And the third is the training.
Henry He: And second, we do also have a very long-term contract from sales side, which can secure the incoming cash flow as well as the client opportunities, and Tench Artifacts to secure more business from the same client as a recurring basis.
Henry He: So I remember the first few quarters ago, we talked about recurring as the most important driver for our profitability. I think right now, given the AI, we do see that recurring revenue percentage much higher if you compare with the old, so-called, the only ICE services.
Henry He: And the third is we also use our capacity.
Henry He: In the old model, we did.
Henry He: Universe of the client, especially the AI company in the market in China today, I think we are leading, with the revenues with the financing sources we have and we can match in those two sides for the long-term going forward.
Henry He: So I think that, The three areas I just mentioned can come to a conclusion that we do not limit ourselves with the cash we already have today.
Henry He: But last note, I think Xiaodan, you probably want to have a ballpark number, which I can mention that the total capex for this year will be always probably a few times if you look at it from ballpark number compared with last year, and that will actually have a very good possibility.
Henry He: We can have more opportunity to increase investment with the capacity.
Henry He: Number two, every dollar we invest today, the ROE and also the recurring cash flow to serve those liabilities and increasing the revenue will be very long-term and very secure.
Henry He: Converged to Accelerated Revenue Growth on the Top Line in the Coming Quarters.
Speaker Change #158: which from the current financials that you are able to see obviously which is a tremendous
Henry He: 第二个问题请周涛总跟你回答, 小萊姆你好,這樣啊,A、A我還是想來想去,還是展開的聊一聊,等下劉涛也可以做出補充,實際上我們A還是分三塊吧。 我現在把它總結成叫做 共用訓練, 全球架模型训练算力的供应 其实刚才已经谈到了,我刚才那个讲话是谈到了大城,其实我们不光是在律师这个方面,其实包括在审计,在银行, 字幕由Amara.org社区提供 以上言論不代表本台立場, 应该所取得的一些实质性进展 我們目前暫時還沒有去披露 在訊息上我們跟辦公的, 我们要国产战力的模型训练 将近一年的这种实践, 前金正恩辦公室的政務國務卿 在实际运用, 這三個維度 从财务上看到的进展情况 当然我们也关注了友商的 其实如果按同比来算 我们其实总数是 是百分之九十, 十倍一千多,这个其实意义不大,因为去年上半年的我们这个规模还小,但是对比QE呢,我们依然有了一个这个翻倍的成长。 總體來說目前數字上反映的還是在供應這個角度, 加上未來我們在用 這個圍繞這個金融啊,這個審計啊,這個律師這些, 这种行业 我们相信还很长 有更好的前景和空間, 然后回报率,刚才何欣问的是回报率,这个确实我在前一个作业谈过 我们总体来讲,目前刚才讲到供应这块, 字幕由Amara.org社区提供 对于业务来讲还是比较高的, 可能沒有單獨披露啊 總體來講是比較高的, 總體公司的毛利率的提升也很大 然后要展望,你刚才也谈到未来共产党的展望,我个人的观点就是从目前掌握的信息来看, 其實我們重點談了幾個行業吧,就是除了這種模型訓練 我先谈供,先谈供这个围绕, 自動駕駛 包括, 汽車行業的增加是包括這個 巨聲科技, 實際上我們都認為還有比較大的空間 大家很清楚,其實就是特斯拉的FSD發布以來,其實, 是蠻震撼的,我們判斷幾乎所有的 包括這幾家新設立造車廠,包括小米, 我覺得都有這個 字幕由Amara.org社区提供, 實際上有幾家 我们要深入沟通,这和未来的增长空间还是一样的, 另外機器人這塊,我想這個…… 我们了解的情况,至少目前, 已經最近達到30億的榮譽 所以那就是, 大模型本身在機器人方面 使得機器人賦予了它智慧, 本身就是我们的意思,判断也是 字幕由Amara.org社区提供, 可能會是一個更廣闊的市場 由 Amara.org 社群提供的字幕, 字幕由 Amara.org 社群提供 密切關注 實際上在, 有了一些實質性進展 當然在Q2還沒體現出來啊 所以这一块我们认为, 未來想像空間非常 所以這是供的這塊,用的這塊呢, 我们也相信啊,觉得我们 跟这几个行业级客户的深入的战略合作, 成果会在下半年以及在明年陆续展现 去年提的一站Smart服务的战略可能会提供一个坚实的实践, 對,所以我們雖然沒有對外 重點談實際上誰的這幾個項目, 字幕志愿者 杨茜茜 我们算是落地了,剩下的就是随着合作的深入,成果逐渐的展现, 我們還是堅信這條路 為企業賦能, AI金融千行百業 更有想象的, 字幕由Amara.org社区提供 所以綜合來講就是, 我还是延续我之前几个季度说的 我说我们从去年六月 金山云的全会上我就说了 全面進入AI時代 我們叫國營AI, 战略的升级,从目前一年多的时间来看 非常顯著的進展 對未來的信心也是非常有信心, 这一年的时间,我们应该讲是 信心更准,斗志更强,布置也会像刚才Harry也会介绍的,我们后期开拍, 这个我们也会 本身的各種需求, 自己這個愛富能的企業的需求 字幕由Amara.org社区提供, Okay, let me just translate, simply translate what Mr. Zhao said.
Henry He: So in terms of AI, I really want to take this opportunity to elaborate a little bit about my overall thoughts.
Speaker Change #158: world
Speaker Change #159: for example ten times year-over-year growth two times
Speaker Change #159: for the AI revenue growth versus the first quarter. But all these numbers that you're currently seeing are mostly coming from the area of the supply of computing power.
Speaker Change #160: However, I do think that in the future, the potential room...
Speaker Change #161: for revenue and for business in terms of training and in terms of for the application of the models have affar are more of potential
Speaker Change #161: Now, I'll circle back to a question about the ROI. I have to say that the GP margin for the AI business
Speaker Change #161: is far higher than that of the other parts of the business, which is also a major contributing factor for the improvement of the company's overall GP margin.
Henry Huang: R&B.
Speaker Change: Now, looking ahead, I would also like to talk about it from two different dimensions. One is the supply of computing power and the second is the inference and the application of AI capabilities. There are a lot of EV firms and all of them have significant and real kind of tangible intention to do this and to implement and to train their own autonomous driving models. So this is a lot of space for our business opportunity. The second one is robotics which we essentially empower robots with artificial intelligence. So we do think we would be having a lot of opportunities in this area as well, noticeably there's one certain company which I'm not going to mention its name has secured 3 billion RMB financing recently so the confidence is very high in this space. Now, the second dimension about the inference or the use cases or the model capability as we have talked about in prepared remarks some of the projects that we have collaborated with some of our partners are being implemented. As we did in such collaboration and the progress and the achievements elaborated in this area we do think that this is actually going to be laying a solid foundation for the one-stop math model service that we aim to provide in this space. So in summary, we do think that our overall strategy of oiling AI since June last year has been very fruitful and we look forward to continue our pace in its investment and development. Thank you. We'll now take our next question. This is from Timothy Zhao from Goldman Sachs. Please go ahead. Next, we'll look at how much more and more AWS AI will be in the future. In the next half of this year, we'll look at the growth of the future. This is the first question. The second question is related to the Fed. In the first question, regarding the revenue contribution from Xiaomi and the King of Groups, I noticed that there was a very strong revenue growth.
Henry He: So in my mind, it's really about three dimensions.
Henry Huang: Revenues from enterprise cloud services reached 657.2 million RMB up from 588.2 million, RMB last quarter due to accelerated project deliveries this quarter.
Henry Huang: We have continued to enhance our cost control, expanding our supply base to improve services quality and procurement prices. Total cost of revenue decreased by 3.4% year-over-year and remained stable quarter-over-quarter at 1,573.4 million RMB.
Speaker Change #162: Now, looking ahead, I would also like to talk about it from two different dimensions. One is the supply of computing power, and the second is the inference and the application of AI capabilities.
Henry He: One is the supply of computing power, the second is the inference, which is the application of the artificial intelligence, and the third is the training.
Henry Huang: IDC costs dropped significantly by 14.4% year-over-year from 860.7 million RMB to 728.2 million RMB this quarter, reflecting the strategic scaling down of our CDS services and optimized utility of rack usage.
Henry He: Which from the current financials that you are able to see, obviously, which is a tremendous growth.
Henry Huang: Depreciation and amortization costs increased from 202.1 million RMB in the same period of last year to 265.9 million this quarter, mainly due to the depreciation of new servers acquired.
Henry He: For example, it's ten times year-over-year growth and two times the AI revenue growth versus the first quarter.
Henry Huang: Solution development and services costs increased by 8.4% year-over-year from 452.9 million RMB to 491.1 million RMB due to the solution personnel expansion of Camelot, which was in line with the revenue growth.
Henry Huang: Fulfillment costs and other costs were 37.6 million RMB and 50.6 million RMB this quarter, respectively.
Henry Huang: Our adjusted growth profit for the quarter was 323.4 million RMB, a 56.4% increase year-over-year, with an adjusted growth margin of 17.1%. This marks, a new record and the eighth consecutive quarters of steady margin improvement, up from 11.3% last year and 16.8% last quarter.
Henry Huang: In terms of expenses, excluding share-based compensation and impairments of long-lived assets, our total adjusted operating expenses were 555.3 million RMB, slightly increased by 3.2% year-over-year and 18.3% quarter-over-quarter, of which our adjusted R&D expenses were 200.1 million RMB, a 3.7% increase from last quarter due to the personnel cost increase. Adjusted selling and marketing expenses were 117.5 million RMB, up from 97.9 million RMB last quarter, representing 6.2% of total revenues.
Henry Huang: This concludes our remarks.
Henry Huang: Adjusted G&A expenses were 237.7 million RMB, compared to 178.7 million RMB last quarter.
Henry He: But all these numbers that you're currently seeing are mostly coming from the area of the supply of computing power.
Henry Huang: As of June 30, 2024, our cash and cash equivalents totaled 1,837.8 million RMB, providing strong liquidity for operations and AI investment.
Henry Huang: Investments. Capital expenditures for this quarter were 654.8 million RMB, reflecting, our investment in infrastructure to support a sustainable AI business.
Henry Huang: Looking ahead, we remain committed to the principle of high quality and sustainable development.
Henry Huang: We will continue to enhance revenue quality, reduce costs and expenses, and improve profitability.
Henry He: However, I do think that in the future, the potential room for revenue and for business in terms of training and in terms of for the application of the models have far more potential.
Henry Huang: Thanks for your attention.
Speaker Change #163: now in the first ension two areas opposes a lot of opportunities one is electric vehicles are in particular as the autonomous driving demand for the evb space
Speaker Change #163: which seems the launch of tus ftsd we have been engaging with a lot of ev firms and all of them have significant and real kind oftangible intention
Speaker Change #163: to do this and to implement and to train their own autonomous driving models.
Henry He: Now, circling back to your question about the ROI, I have to say that the GP margin for the AI business is far higher than that of the other parts of the business, which is also a major contributing factor for the improvement of the company's overall GP margin.
Speaker Change #163: So this is a lot of space for our business opportunity. The second one is robotics, which essentially empowers robots.
Speaker Change #164: with artificial intelligence. So we do think we will be having a lot of opportunities in this area as well. Noticeably, there's one certain company, which I'm not going to mention its name, has secured 3 billion RMB financing recently. So the confidence is very high in this space.
Henry He: Now, looking ahead, I would also like to talk about it from two different dimensions.
Speaker Change #164: Now, the second dimension about the inference or the use cases for the model capability
Speaker Change #165: As we have talked about in prepared remarks,
Speaker Change #165: Some of the projects
Speaker Change #165: that we have collaborated with some of our partners are being implemented as we deepen such collaboration and the progress and achievements elaborated in this area. We do think that this is actually going to be laying a solid foundation for the one-stop mass model-as-a-service services that we aim to provide in this space.
Speaker Change #165: So, in summary, we do think that our overall strategy of avoiding AI since June last year has been very fruitful, and we look forward to continue our pace in its investment and development.
Henry Huang: We are now happy to take your questions.
Henry He: One is the supply of computing power, and the second is the inference and the application of AI capabilities.
Operator: Please ask your question in both Chinese Mandarin and English. Operator, please go ahead.
Operator: Thank you.
Speaker Change #166: next confrom for you thank you
Henry He: Now, in the first dimension, two areas poses a lot of opportunities. One is electric vehicles, and in particular, the autonomous driving demand for the EV space.
Henry He: Which since the launch of Tesla's FSD, we have been engaging with a lot of EV firms, and all of them have significant and real kind of tangible intention to do this, and to implement, and to train their own autonomous driving models.
Speaker Change #167: Thank you.
Speaker Change #168: We'll now take our next question.
Speaker Change #169: This is from Timothy Zhao from Goldman Sachs. Please go ahead.
Henry He: So this is a lot of space for our business opportunity.
Speaker Change #170: Thank you, Relations Team, for accepting my question. Good evening, Mr. Zhou, Henry Clark, and Nico. I have two questions I'd like to ask. The first question is that I noticed our revenue from Xiaomi and Kingsoft Group has seen very strong growth this quarter, accounting for 20% of our total revenue. Could the Relations Team share more about the sources of this growth?
Speaker Change #170: So, among these revenues, what proportion comes from, for example, AI-related income?
Patricia: Additionally, with the increasing number of Xiaomi cars in the second half of the year and the progress in the monetization of WPS's AI, how should we think about the revenue contribution from Xiaomi and Kingsoft in the second half of this year and even in the longer term? This is the first question.
Patricia: The second question I would like to ask is about the non-AI side. We have observed that the CDN revenue has further declined this quarter. I would like to ask, at what level do we consider the overall CDN performance to be at a relatively appropriate level? That's basically the two questions. I will quickly translate.
Operator: Thank you.
Henry He: Now, the second one is robotics, which essentially empowers robots with artificial intelligence.
Speaker Change #172: Thank you for taking my question. I have two questions here and the first question is regarding the revenue contribution from Xiaomi and Kingsoft Group as I noticed that there was a very strong revenue growth.
Speaker Change: Regarding the contribution of WPS from Kingsoft Group on the street, how do you view the income contribution here? The second question is about CDN revenue. We have seen a continuous decrease in CDN revenue. Could you share the income contribution of this company? Thank you. Thank you, Tim. I will answer the first question, and then I will ask Mr. Zou and our CDN team leader to address the second question. The first question is about the income contribution of the related company. I think you are right, Tim. I believe we have seen some very important leading positive signals regarding future income contribution growth. Firstly, as we mentioned, by providing stronger business connections, especially with Xiaomi and Kingsoft Group, we are offering more resources and increasing the income and demand from our internal customers. As we mentioned a few months ago, I think this is a very good opportunity for Kingsoft Cloud. So, in this half-month period, the revenue from Xiaomi and Kingsoft Group increased by about 36.9% year-on-year, contributing approximately 37 billion RMB for this half-month period. I think this is very good news because it proves that we can serve very important internal customers, including Xiaomi and Kingsoft, including WPS. Therefore, I believe that autonomous driving scenarios and applications, as well as AI-related services, are important drivers of this opportunity. We are also pleased to see that, under this forward trend, perhaps by the end of this year, when we transition to the new financial year, we may ask investors to provide us with increased company funding commitments. So, I also want to share some good news with you. Maybe in the next two to three months, at the investor conference, we will propose increased funding commitments to demonstrate our high visibility of funding for internal enterprises. The second point is the contribution of AI funding. I would say that the increase in funding for our internal enterprises is mainly due to AI funding. This is the first point. The second point is that about half of the total AI funding, as you have noticed, is approximately half of the company's funding. Let's say, half comes from related enterprises, and the other half comes from external enterprises. I think this proves our ability to serve not only internal enterprises but also external enterprises with the same capability for services and products. As you have noticed, most of our external enterprises are the first-tier AI model enterprises in China's technology sector. I think this provides a balance between internal and external enterprises.
Speaker Change #173: in the past quarter and the total revenue contribution.
Henry He: So we do think we will be having a lot of opportunities in this area as well.
Speaker Change #174: already achieved 20% of the total revenue. So may I ask, what is the driver behind that and what is the AI-related revenue contribution from Xiaomi and Kingsoft Group to their revenue to Kingsoft Cloud? And into the second half of this year and into the longer term, given we have more cars from Xiaomi on the street as well as the AWS monetization from Kingsoft Group, how do you think about the revenue outlook from here?
Operator: To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.
Operator: And to withdraw your question, you can press star 1 and 1 again.
Speaker Change #175: And second question is regarding the CDN revenue, as we see a continual proactive downscaling of the CDN revenue, could managers share any thoughts on the outlook for this business line going forward? Thank you.
Operator: Thank you.
Operator: We will now take our first question.
Xiaodan Zhang: This is from the line of Xiaodan Zhang from CICC.
Henry He: Noticeably, there's one certain company, which I'm not gonna mention its name, has secured 3 billion RMB financing recently.
Speaker Change #176: Thank you, Tim. I will answer the first question, and then I will ask Mr. Zhou and the responsible personnel from our CDN team to talk about the second question.
Henry He: So the confidence is very high in this space.
Xiaodan Zhang: Please go ahead.
Speaker Change #177: The first question regarding the related party's revenue contribution, I think Tim, you're right.
Xiaodan Zhang: Your line is open.
Xiaodan Zhang: I will now quickly translate my question.
Speaker Change #178: i think we do see a few very important leading positive sign no regarding the revenue popresci growth inthefuturei think the first of is really as we mention a giving a stronger business connections
Henry He: Now, the second dimension about the inference or the use cases for the model capability, as we have talked about in prepared remarks, some of the projects that we have collaborated with some of our partners are being implemented as we deepen such collaboration.
Xiaodan Zhang: Thank you, Xiaodan.
Tao Zou: I will now answer the first question.
Speaker Change #179: Especially with the Xiaomi and the Kingsoft group, we're allocating more resources and we prioritize the revenue and the client demand from our internal client.
Tao Zou: First of all, I think you pointed out correctly.
Henry He: And the progress and the achievements elaborated in this area, we do think that this is actually gonna be laying a solid foundation for the one-stop mass model as a services that we aim to provide in this space.
Henry He: So in summary, we do think that our overall strategy of OEI since June last year has been very fruitful, and we look forward to continue our pace in that manner developed.
Operator: Would you like to ask a question, please?
Tao Zou: This year, we are actually accelerating our investment in, we think, a very good area of potential business growth opportunities.
Tao Zou: Most of the cutbacks, I think probably over 95%, or even higher, are relating directly to the AI investment, which we think is a very good positive opportunity for us.
Tao Zou: At this moment, while we cannot give a full guidance for the four-year cutbacks investment, I think we can probably look into two different areas.
Operator: Diolch.
Tao Zou: First of all, for this quarter, you may also notice that we recorded a net cash inflow from the operations side, which is around about 151 million RMB.
Speaker Change #180: As we mentioned a few months ago, I think this is actually a very good opportunity for Kingsoft Cloud. So, for this quarter, the revenue from Xiaomi and the Kingsoft Group...
Operator: We'll now take our next question.
Speaker Change #180: increased around 36.9% year-over-year and contributing to about 370 million RMB for this quarter alone.
Tao Zou: And I think you can already see that the cutbacks investment into the good area of business already converted into a positive inflow from operations cash flow.
Speaker Change #180: I think it is a very positive signal given it is proven of our capability to serve very important internal clients, including Xiaomi and Kingsoft.
Tao Zou: So this is actually the first part, point.
Tao Zou: So the second point is we also expanded our financing channels.
Speaker Change #180: including WTS as well. So I think the scenario and applications from auto driving from the AI related SAS services
Tao Zou: For example, you also notice last year we secured the financing support from Kingsoft Group as well as the leasing potential opportunities from Xiaomi, Group as well.
Tao Zou: But this year, especially in the last two quarters, we also got great support from, for example, the national policy banks, the state-owned financial institutions, including both banks and also the leasing companies.
Tao Zou: So in that way, we actually do not limit ourselves with a certain cap of the cashback investments, just looking at the only amount of our cash balance today.
Speaker Change #180: are very important drivers for this opportunity. And we're also happy to see, given this trend going forward,
Tao Zou: So my point is, given those additional opportunity and financing channels, we actually can reopen and have a very high ceiling of the financial capability we can get to support an AI investment.
Tao Zou: The third point is, given the investment is a long-term, we also measure very carefully regarding the profitability and the sustainability of those investments.
Speaker Change #181: Maybe it is possible by the end of this year, as we are turning to a new financial year, we may be asking the shareholders to give us an increasing cap of the related party revenue approval.
Tao Zou: And at this moment, we are happy to share most of our AI clients are well-known names.
Tao Zou: You probably also notice on the market.
Speaker Change #181: So I just want to also share this good news with you that maybe for the next two or three quarters in the shareholder meetings, we are going to be happy to propose a higher ceiling of the revenue cap.
Speaker Change #181: to prove that we do have a great visibility of the internal revenue from a related party.
Tao Zou: And the second, we do also have a very long-term contract from sales side, which can secure the incoming cash flow as well as the client opportunities, with a potential upside to secure more business from the same client as a recurring basis.
Tao Zou: So I remember first few quarters ago, we talked about recurring as most important driver for our profitability. I think right now, given the AI, we do see that recurring revenue percentage a much higher if you compare with the old so-called the only ICE services in the old model we did before.
Speaker Change #181: The second part is relating the AI revenue contribution. I would say that the incremental revenue from our internal parties are primarily due to the AI-related revenues. So that's the first point. The second point is...
Tao Zou: So I think that three areas I just mentioned can come to a conclusion that we do not limit ourselves with the cash we already have today.
Tao Zou: We can have more community increasing investment with the capacity.
Tao Zou: Number two, every dollar we invest today, the ROE and also the recurring cash flow, to serve those liability and increasing the revenue will be a very long-term and very secure.
Speaker Change #181: around half of the AI total revenue, as you'll notice that it's actually approximately
Speaker Change #181: One quarter of the revenue of public cloud for this quarter.
Speaker Change #181: Let's say half are coming from related parties, but also the other more than half are from external clients.
Tao Zou: And the third is we also use our capacity to secure a good universe of the client, especially the AI company in the market in China today.
Speaker Change #182: I think that strikes a good balance.
Tao Zou: I think we are leading on the front with the revenues with the financing sources we have and we can match in those two sides for the long term going forward.
Speaker Change #182: regarding we prove our capability to serve internal clients but also have equal capability.
Tao Zou: But last note, I think you probably want to have a ballpark number, which I can mention that the total capex for this year will be always probably a few times if you look at it from ballpark number compared with last year.
Speaker Change #182: to have those services and products for the outside clients. As you may notice that our outside clients are also, most of them are the tier one AI model companies in the China tech space today. I think that actually strikes true balance from internal and outside, but also.
Tao Zou: And that will actually have a very good possibility to convert to an accelerated revenue growth on the top line in the coming quarters.
Speaker Change: to see potential increase, especially the visibility of the potential upside of the revenue growth going forward. And the last note on the first question, I will mention that given Yucen observed our growth model has improved steadily, the incremental dollar of the growth profit also primarily due to the contribution from our AI related business. And given we are carefully select the AI client today, and we think those revenue can be sustainable, secured and visible going forward. And we are going to also learn about past experience that will control, for example, the business contracts and the business model. And also notice the potential risks in working out those revenues, and we can also strike a return and a risk profile for the profits and the contracts we are working on in the AI space. I think that's all for the first part of the question. And then the second one, Yubian and Zedian Liu, I think we are going to do a good job. I would like to ask you a question. I would like to ask you a question. Hello, I am Zedian Liu. This is Zedian Liu's second question. I am Zedian Liu's second question. Zedian Liu is the first generation of Zedian Liu. Zedian Liu also has a high-level growth and high growth value. And from our whole process, Zedian Liu is the first generation of Zedian Liu. Basically, the total revenue of all three billion people is the first generation of Zedian Liu. Zedian Liu is the first generation of Zedian Liu. And in the same way, [inaudible] the things that we are going to talk about in the past. And this is one of the things that we are going to talk about in the past.
Tao Zou: Thank you.
Speaker Change #183: to see potential increase, especially the visibility of the potential upside of the revenue growth going forward. And the last note on the first question.
Tao Zou: Wear.ai的大模型训练的算力的供应,以及在,其实刚才已经谈到了,我刚才那个讲话是谈到了大城,其实我们不光是在律师这个方面,其实包括在审计,在银行,企业级的模型应用上,应用上我们也在应该说取得了一些实质性进展。 所以总体来说,目前数字上反映的还是在供应这个角度,实际上加上未来我们在用,围绕金融、审计、律师这几个行业,我们相信还会有更好的前景和空间。 总体公司的毛利率的提升也很大程度是受益于此。 然后要展望,您刚才也谈到未来AI空间的展望,我个人的观点,从目前掌握的信息来看,其实我们重点谈了几个行业。 除了这种模型训练,我们自己先谈供,供这个为主。 我们在自动驾驶,包括汽车行业的自动驾驶,包括巨声科技,巨声智能,其实就是机器人这个领域,实际上我们都认为还有比较大的空间。 自动驾驶大家很清楚,其实就是特斯拉的FSD发布以来,其实还是蛮震撼的,我们判断几乎所有的头部的这几家新势力造车厂,包括小米,我觉得都有这个计划去布局。 实际上有几家我们已经做了比较深的沟通,所以未来的增长空间还是依然很大。 对,其实另外机器人这块,我想这个,据我们了解的情况,至少目前某家已经最近达到三十亿的融资了,对,所以就是大模型本身在机器人方面,使得机器人赋予了它智慧,这种本身其实我们也是判断,也是在汽车这个行业应用之外, 可能会是一个更广阔的市场和空间,对,我们也其实一直在密切关注,并且实际上在有了一些实质性进展,当然在Q2还没体现出来,所以这一块我们认为也是未来想象空间非常非常大,所以这是指供的这块, 所以综合来讲,我还是延续我之前几个季度说的,从去年六月金正恩全会上我就说了,我们全面进入AI时代,我们叫All in AI,对,战略的升级,从目前一年多的时间来看取得了非常显著的进展,对未来的信心也是, 随着这一年的时间,我们应该讲是信心更准,斗志更强,布置也会像刚才Harry也会介绍的,我们后续开发一些支出,我们也会去根据客户本身的扩容需求,以及我们自己AI赋能的企业的需求,我们还是会持续稳定地去投入,好吗?
Tao Zou: Now, looking ahead, I would also like to talk about it from two different dimensions.
Tao Zou: One is the supply of computing power, and the second is the inference and the application, of AI capabilities.
Speaker Change #184: I want to mention that, uh, given you can find that you can observe our growth margin has been improving steadily, the incremental dollar of the growth profit are also primarily due to the contribution from our AI related business.
Tao Zou: Now, in the first dimension, two areas poses a lot of opportunities.
Tao Zou: One is electric vehicles, and in particular, the autonomous driving demand for the EV space, which since the launch of Tesla's FSD, we have been engaging with a lot of EV firms, and all of them have significant and real kind of tangible intention to do this and to implement and to train their own autonomous driving models, so this is a lot of space for our business opportunity.
Tao Zou: Now, the second one is robotics, which essentially empowers robots with artificial intelligence, so we do think we will be having a lot of opportunities in this area as well.
Speaker Change #184: And given we are carefully selecting AI clients today, and we think those revenues can be sustainable.
Tao Zou: Noticeably, there's one certain company, which I'm not going to mention its name, has secured, 3 billion RMB financing recently, so the confidence is very high in this space.
Tao Zou: Now, the second dimension about the inference or the use cases for the model capability, as we have talked about in prepared remarks, some of the projects that we have collaborated with some of our partners are being implemented as we deepen such collaboration, and the progress and achievements elaborated in this area, we do think that this is actually going to be laying a solid foundation for the one-stop mass model as a service that we aim to provide in this space, so in summary, we do think that our overall strategy of owing AI since June last year has been very fruitful, and we look forward to continue our pace in its, investment and development.
Tao Zou: Thank you.
Speaker Change #185: Secured and visible going forward and we're going to also learn from past experience that we will control for example the business contracts and the business model and Also notice the potential risks in working on those
Speaker Change #185: revenues and we can also strike a return and the risk profile for the profits and contract our working on
Speaker Change #186: i think that's all for the for the first part of the question i garro going you're bearing a ided on good shere doing of this
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Speaker Change #188: fu ththirs gia with a dever
Speaker Change #188: at bottom of you had done a sense a younger and he was a ch color anything ofquid disa
Speaker Change #189: Hello, I am the head of the CDN department at Kingsoft Cloud. Just now, I was about to answer your second question. Regarding the CDN business, we first need to analyze its type. For standard CDN business, we are now giving up on the standard first-profit CDN business. However, the CDN business also includes high-margin, high-growth, and high-technical-value services.
Speaker Change #189: From our overall planning perspective, our standard CDC business is basically reduced to a scale of around 300 million yuan in revenue per quarter. This is our standard scale, the minimum scale, and it will not be lower than this. At the same time, based on this, our current growth is dynamically accelerating.
Operator: Your next question, please.
Speaker Change #190: bo need that youyour ud not get come money that you in here ro general on junge y' where with that that so listen to the muy sure able last to each say
Speaker Change #191: ro looking ick c should not with amulance
Speaker Change #192: so i think the right way to to understand to think about this question is that we have to make a distinction between two types of syit business one is the
Operator: Thank you.
Operator: We'll now take our next question.
Speaker Change #193: The standard CDM business, which is typically marked by a lower profit margin, and there's this other kind of CDM business, which represents usually higher margins.
Timothy Tsao: This is from Timothy Tsao from Goldman Sachs.
Timothy Tsao: Please go ahead.
Speaker Change #193: For example, like the...
Speaker Change #193: Live Broadcasting Acceleration, the Dynamic Acceleration, etc. And this usually has high image because they have their higher value added.
Speaker Change #193: So, my quick answer is that, for the first type of standard CDN business,
Speaker Change #193: The minimum amount that we aim to maintain on a quarterly basis is 300 million RMB. And I do not expect it to be lower than that. That serves as a base for our business, our overall business. And then we'll continue to invest and to expand the higher margin part of the TDM business.
Timothy Tsao: 好的,感谢关于曾接受我的提问,邹总,Henry,Clark,Nicole,晚上好, 那我这边有两条问题想要请教一下,第一条问题是我看到 我们来自于小米和金山集团的收入在这个季度有一个非常强劲的增长, 这是第一个问题,那第二个问题想请教一下关于非AI这边, 我们看到这个CDN的收入在这个季度有进一步的下行, 那想请教一下我们认为到一个什么样的水平, 那整个CDN的这个水平是我们觉得是一个比较合适的水平, 那大概就是这两个问题,我很快翻译一下。 谢谢曼珍接受我的问题,我这里有两个问题, 第一个问题是关于小米和金山的收入贡献, 我发现他们的收入增长非常强。 as well as the AWS monetization from Kingsoft Group?
Timothy Tsao: How do you think about the revenue outlook from here?
Timothy Tsao: Thank you.
Speaker Change #194: Yeah, that concludes my answer.
Timothy Tsao: And second question is regarding the CDN revenue as we see a continual proactive downscaling, of the CDN revenue, could managers share any thoughts on the outlook for this business line going forward?
Henry Huang: Thank you, Tim.
Timothy Zhao: Dyma oes Timothy Zhao o Goldman Sachs, diolch yn fawr.
Henry Huang: 我回答第一个问题,然后请周总和我们CDN团队的负责人讲一下第二个问题。 The first question regarding the related parties revenue contribution, I think Tim you are right.
Timothy Zhao: 好的,感谢关系层接受我的提问, 周总,Henry, Clark, Nicole, 晚上好 那我这边有两条问题想要请教一下 第一条问题是我看到我们来自于小米和金山集团的收入 在这个季度有一个非常强劲的增长 也占到了我们整体收入的一个20% 那我不知道可不可以请关系层再多分享一下 我们看到这个增速的来源是哪些 那这些收入之中来自于比如说AI的收入占比分别会有多少 那另外随着小米的汽车在下半年越来越多 以及WPS的AI的这个货币化的进展 那我们怎么去想在今年下半年甚至更长期来自于小米和金山的收入的贡献 这是第一个问题, 那第二个问题想请教一下关于非AI这边 我们看到这个CDN的收入在这个季度有进一步的下行 那想请教一下我们认为到一个什么样的水平 那整个CDN的这个水平是我们觉得是一个比较合适的水平 那大概就是这两个问题我很快翻译一下 谢谢你接受我的问题 我这里有两个问题 第一个问题是关于Xiaomi和Kingsoft的利润贡献 我发现Xiaomi和Kingsoft的利润贡献是非常强大的 in the past quarter, and the total revenue contribution already achieved to 20% of the total revenue.
Speaker Change #195: Thank you.
Henry Huang: I think we do see a few very important leading positive signals regarding the revenue potential, growth in the future.
Timothy Zhao: So may I ask, what is the driver behind that, and what is the AI-related revenue contribution from Xiaomi and Kingsoft Group to their revenue to Kingsoft Cloud?
Henry Huang: I think the first of all is really, as we mentioned, giving a stronger business connection, especially, with the Xiaomi and Kingsoft Group, we are allocating more resources and we prioritize the revenue and the client demand from our internal client, as we mentioned a few months ago.
Henry Huang: The second part is relating the AI revenue contribution.
Speaker Change: Thank you, there were no further questions at this time, so we'll now hand back to Nicole Shan for any closing remarks. Let's connect.
Timothy Zhao: And into the second half of this year and into the longer term, given we have more cars from Xiaomi on the street as well as the AWS monetization from Kingsoft Group, how do you think about the revenue outlook from here?
Henry Huang: I think this is actually a very good opportunity for Kingsoft Cloud. So for this quarter, the revenue from Xiaomi and Kingsoft Group increased around 36.9% year over year and contributing to about 370 million RMB for this quarter alone.
Henry Huang: I will say that the incremental revenue from our internal parties are primarily due to, the AI related revenues, so that's the first point.
Timothy Zhao: And the second question is regarding the CDN revenue as we see a continual proactive downscaling of the CDN revenue.
Speaker Change #196: Thank you, Timothy. And this concludes our 20 minutes.
Henry Huang: I think it is a very positive signal given it is a proven of our capability to serve, very important internal client, including Xiaomi and Kingsoft, including WTS as well.
Henry Huang: The second point is around half of the AI total revenue, as you'll notice that is actually, approximately one quarter of the revenue of public cloud for this quarter, let's say half are coming from related parties, but also more than half are from external clients.
Timothy Zhao: Could you share any thoughts on the outlook for this business model going forward?
Henry Huang: So I think the scenario and applications from auto driving, from the AI related staff services, are very important driver for this opportunity.
Henry Huang: I think that strikes a good balance regarding we prove our capability to serve internal, clients, but also have equal capability to have those services and products for the outside clients.
Timothy Zhao: Thank you.
Henry Huang: And we are also happy to see, given this trend going forward, maybe it is possible, by end of this year, as we are turning to a new financial year, we may be asking the shareholders to give us an increasing cap of the related party revenue approval.
Henry Huang: As you may notice that our outside clients are also, most of them are the Tier 1 AI model, companies in the China tech space today.
Henry He: Thank you, Tim.
Henry Huang: So I just want to also share this good news with you that maybe for the next two or three, quarters in the shareholder meetings, we are going to be happy to propose a higher ceiling of the revenue cap to prove that we do have a great visibility of the internal revenue from the related parties.
Henry Huang: I think that actually strikes true balance from internal and outside, but also, to see a potential increase, especially the visibility of the potential upside of the revenue growth going forward.
Henry He: I'll answer the first question, and then I'll ask Mr. Zou and our team to answer the second question.
Henry Huang: And the last note on the first question, I want to mention that given you can find, you, can observe our growth margin has been improving steadily, the incremental dollar of the growth profit are also primarily due to the contribution from our AI-related business.
Operator: Dydyn ni ddim yn cael cwestiynau ar hyn o bryd, felly rydyn ni'n edrych ar ôl i Nicole Shan ar gyfer unrhyw adroddiadau.
Henry He: The first question regarding the related parties' revenue contribution.
Henry Huang: And given we are carefully select the AI clients today, and we think those revenue, can be sustainable, secured, and visible going forward. And we are going to also learn from past experience that we will control, for example, the business, contracts and the business model, and also notice the potential risks in working on those revenues.
Henry He: I think, Tim, you're right. I think we do see a few very important leading positive signals regarding the revenue potential growth in the future.
Speaker Change #197: Thank you, there are no further questions at this time, so I will now hand back to Nicole Shan for any closing remarks.
Henry Huang: I think that's all for the first part of the question.
Henry Huang: And we can also strike a return and a risk profile for the profits and the contracts, we are working on in the AI space.
Henry He: I think the first of all is really, as we mentioned, giving a stronger business connection.
Henry Huang: So I think the right way to understand, to think about this question is that we have, to make a distinction between two types of CDN business.
Henry He: Especially with the Xiaomi and the Kingsoft group, we allocated more resources and we prioritized the revenue and the client demands from our internal client.
Henry Huang: One is the standard CDN business, which is typically marked by a lower profit margin.
Henry He: As we mentioned a few months ago, I think this is actually a very good opportunity for Kingsoft Cloud.
Henry Huang: And there's this other kind of CDN business, which represents usually higher-capacity, higher-quality CDN business.
Nicole Shan: Thank you and thank you all once again for joining us today.
Henry He: So for this quarter, the revenue from Xiaomi and the Kingsoft group increased around 36.9% year over year. And contributing to about 370 million RMB for this quarter alone.
Henry Huang: And the other one is the high-capacity CDN business, which is typically a higher-capacity, CDN business.
Nicole Shan: If you have any further questions, please feel free to contact us.
Henry He: I think it is a very positive signal given it is a proven of our capability to serve very important internal client, including Xiaomi and Kingsoft, including WTS as well.
Henry Huang: And the other one is the standard CDN business, which is typically a higher-capacity CDN business. So I think the right way to understand, to think about this question is that we have, to make a distinction between two types of CDN business.
Nicole Shan: We look forward to speaking with you again next quarter.
Henry He: So I think the scenario and applications from auto driving, from the AI related staff services, are very important drivers for this opportunity.
Henry Huang: One is the standard CDN business, which represents usually higher margins.
Nicole Shan: Thank you and thank you all once again for joining us today.
Nicole Shan: Have a nice day.
Henry He: And we're also happy to see, given this trend going forward, maybe it is possible by end of this year, as we are turning to a new financial year, we may asking the shareholders to give us an increasing cap of the related party revenue approval.
Henry Huang: For example, like the live broadcasting acceleration, the dynamic acceleration, etc.
Nicole Shan: If you have any further questions, please feel free to contact us.
Nicole Shan: Thank you all.
Henry He: So I just want to also share this good news with you that maybe for the next two or three quarters in the shareholder meetings, we are going to happy to propose a higher ceiling of the revenue, will are primarily due to the AI-related revenues.
Henry Huang: And this usually has a higher margin because they have their higher value added.
Nicole Shan: We look forward to, speaking with you again next quarter.
Speaker Change #198: Thank you and thank you all once again for joining us today. If you have any further questions, please feel free to contact us. We look forward to speaking with you again next quarter. Until next time, thank you all. Bye.
Nicole Shan: Bye.
Henry He: So that's the first point.
Henry Huang: So my quick answer is that for the first type of standard CDN business, the minimum amount, that we aim to maintain on a quarterly basis is 300 million RMB.
Operator: Thank you.
Henry He: The second point is, around half of the AI total revenue, as you'll notice that it's actually approximately quarter of the revenue of public cloud for this quarter.
Henry Huang: And I do not expect it to be lower than that.
Nicole Shan: Have a nice day.
Henry He: Let's say half are coming from related parties, but also the other more than half are from the external clients.
Henry Huang: That serves as a base for our business, our overall business.
Nicole Shan: Thank you all.
Henry He: I think that strikes a good balance regarding we prove our ability to serve internal clients, but also have equal capability to have those services and products for outside clients.
Henry Huang: And then we'll continue to invest and to expand the higher margin part of the CDN business.
Nicole Shan: Bye.
Henry He: As you may notice that our outside clients are also, most of them are the tier one AI model companies in the China tech space today.
Henry Huang: Yeah, that concludes my answer.
Henry He: I think that actually strikes true balance from internal and outside, but also, for the Q&A.
Henry Huang: Thank you.
Operator: Thank you.
Henry He: And given we are carefully selected the AI clients today, and we think those revenue can be sustainable.
Henry Huang: Yeah, thank you, Team Z.
Operator: This concludes today's conference call.
Henry He: We are going to also learn about past experience that will control, for example, the business contract and the business model and also notice the potential risks in working on those projects.
Henry Huang: And this concludes our Q&A.
Operator: This concludes today's conference call.
Henry He: News.
Operator: Thank you.
Operator: Thank you for participating and you may now disconnect.
Henry He: And we can also strike a return and a risk profile for the profits and the contracts who are working on it.
Nicole Shan: There are no further questions at this time, so we'll now hand back to Nicole, Shan for any closing remarks.
Henry He: I think that's all for the first part of the question.
Unknown Executive: 然后下面第二个关于边运和CDN的业务,请我们的业务,我们的副主持人同事也做一个。 因为今天正好 鲍总也到了现场,第二个问题我就请他来给你回答一下。 您好,我是金山雲CGN部分的負責人。剛才我要回答您的第二個問題,關於CGN業務的話,可能我們第一要區分一下它的一個類型。標準CGN業務,我們現在放棄的是標準低利潤的CGN業務,但是CGN業務同時還包含了高毛利、高增長的高技術價值的業務。 从我们整个的规划来说,我们标准的CDC业务的话,基本削减到每个季度3亿左右的人均利息收入的体量,就是一个我们的标准体量,就是最低的体量,不会比这个再低。 在这个同时,这个基础上的话,我们现在增长的动态加速,直播加速,直播转码,这些都是高毛利的CDC业务,所以说整个我们的CDC业务,整体的业务,未来还会扩大。 但是,最低毛利收入那部分的话,我们最低是3亿。 我不知道这个问题是否能回答您的问题, So I think the right way to understand, to think about this question is that we have to make a distinction between two types of CDM business. One is the standard CDM business, which is typically marked by a lower profit margin.
Unknown Executive: And there's other kind of CDM business which represents usually higher margins. For example, like the live broadcasting acceleration, the dynamic acceleration, etc. And this usually has higher margin because they have their higher value added.
Speaker Change #199: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
Unknown Executive: So my quick answer is that for the first type of standard CDM business, the minimum amount that we aim to maintain on a quarterly basis is 300 million RMB.
Unknown Executive: And I do not expect it to be lower than that.
Unknown Executive: That serves as a base for our business, overall business.
Unknown Executive: And that will continue to invest and to expand the higher margin part of the CDM business.
Unknown Executive: Yeah, that concludes my.
Unknown Executive: 謝謝, Thank you, Timothy, and this concludes our event.
Operator: Diolch.